ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended January 29, 2012

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-21888

PetSmart, Inc.

(Exact name of registrant as specified in its charter)

Delaware

94-3024325

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

19601 N. 27th Avenue

Phoenix, Arizona

85027

(Address of principal executive offices)

(Zip Code)

Registrants telephone number, including area code:

(623) 580-6100

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $.0001 par value

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405
of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨

Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x

Accelerated filer

¨

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes ¨ No x

The aggregate market value of the common stock held by non-affiliates of the registrant, based on the closing sale price
of the registrants common stock on July 31, 2011, the last business day of the registrants most recently completed second fiscal quarter, as reported on the NASDAQ Global Select Market was approximately $4,816,157,000. This
calculation excludes approximately 793,000 shares held by directors and executive officers of the registrant. This calculation does not exclude shares held by such organizations whose ownership exceeds 5% of the registrants outstanding
common stock as of December 31, 2011, that have represented to the registrant that they are registered investment advisers or investment companies registered under Section 8 of the Investment Company Act of 1940.

The number of shares of the registrants common stock outstanding as of March 9, 2012, was 109,892,381.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2012 Annual Meeting of Stockholders to be held on June 13, 2012, to be filed
on or about May 2, 2012, have been incorporated by reference into Part III of this Annual Report on Form 10-K.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on managements current expectations and beliefs about future events or future financial performance. We have attempted to identify
forward-looking statements by words such as: anticipate, believe, can, continue, could, estimate, expect, intend, may, plan,
potential, predict, should, will, or other comparable terminology. These statements are not guarantees of future performance or results and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under Item 1A. Risk Factors contained in Part I of this Annual Report, that may cause our actual results, levels of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe the expectations and beliefs reflected in the forward-looking statements are reasonable, such statements speak only as of the date this Annual Report on Form 10-K is filed, and
we disclaim any intent or obligation to update any of the forward-looking statements after such date, whether as a result of new information, actual results, future events or otherwise, unless required by law.

Our fiscal year consists of the 52 or 53 weeks ending on the Sunday nearest January 31 of the following
year. The 2011 fiscal year ended on January 29, 2012, and was a 52-week year. The 2010 and 2009 fiscal years were also 52-week years. Unless otherwise specified, all references in this Annual Report on Form 10-K to years are to fiscal
years.

Item 1. Business

General

We opened our first stores in 1987 and have become the leading specialty provider of products, services and solutions for the lifetime needs of pets. We have identified a large group of pet owners we call
pet parents, who are passionately committed to their pets and consider their pets members of the family. Our strategy is to attract and keep these customers by becoming the preferred provider for the Total Lifetime CareSM of pets.

We opened 45 net new stores in 2011 and at the end of the year operated 1,232 retail stores in the United States,
Puerto Rico and Canada. Square footage in 2011 increased 0.6 million to 27.2 million compared to 26.6 million in 2010. Our stores typically range in size from 12,000 to 27,500 square feet and carry a broad selection of high-quality
pet products at everyday low prices. We offer approximately 10,000 distinct items, including nationally recognized brand names, as well as an extensive selection of proprietary brands across a range of product categories.

We complement our strong product assortment with a wide selection of pet services, including grooming, training, boarding
and day camp. All our stores feature pet styling salons that provide high-quality grooming services and offer comprehensive pet training services. As of January 29, 2012, we offered pet boarding at 192 of our stores through our PetSmart
PetsHotels®, or PetsHotels.

As of January 29, 2012, there were full-service veterinary
hospitals in 799 of our stores. MMI Holdings, Inc., through a wholly owned subsidiary, Medical Management International, Inc., collectively referred to as Banfield, operated 791 of the hospitals under the registered trade name of
Banfield, The Pet Hospital. The remaining 8 hospitals are operated by other third parties in Canada.

Our PetPerks® program enables us to understand the needs of our customers and target offers directly to them. We also reach customers through PetSmart.com®, our pet e-commerce and community site,
as well as selected social networking sites.

The Pet Industry

The pet industry serves a large and growing market. The American Pet Products Association, or APPA, estimated
the calendar year 2011 market at approximately $50.8 billion, an increase of nearly 200% since calendar year 1994. Based on the 2011-2012 APPA National Pet Owners Survey, approximately 62% of households in the United States own a pet, which equates
to nearly 73 million homes. In total, there are approximately 86 million cats and 78 million dogs owned as pets in the United States.

The APPA divides the pet industry into the following categories: food and treats, supplies and medicines, veterinary care, pet services (such as grooming and boarding) and live animal purchases. The APPA
estimates that food and treats for dogs and cats are the largest volume categories of pet-related products and in calendar year 2011, accounted for an estimated $19.5 billion in sales, or 38.4% of the market.

Pet supplies and medicine sales account for 22.4% or $11.4 billion, of
the market. These sales include dog and cat toys, collars and leashes, cages and habitats, books, vitamins and supplements, shampoos, flea and tick control and aquatic supplies. Veterinary care, pet services, and live animal purchases represent
27.8%, 7.2% and 4.2%, respectively, of the market.

Competition

Based on total net sales, we are North Americas leading specialty retailer of products, services and solutions for
the lifetime needs of pets. The pet products retail industry is highly competitive and can be organized into seven different categories:



Warehouse clubs and other mass merchandisers;



Grocery stores;



Specialty pet supply stores;



Veterinarians;



General retail merchandisers;



Farm and feed stores; and



E-commerce and catalog retailers.

We believe the principal competitive factors influencing our business are product selection and quality, customer service, convenience of store locations, store environment, price and availability of
other services. Many premium pet food brands, which offer higher levels of nutrition than non-premium brands, are not currently sold through grocery stores, warehouse clubs and other mass and general retail merchandisers due to manufacturers
restrictions, but are sold primarily through specialty pet supply stores, veterinarians and farm and feed stores. In addition, our unique relationship with Banfield allows us to sell therapeutic pet foods at our stores with Banfield hospitals. We
believe our pet services business provides a competitive advantage that cannot be easily duplicated. We compete effectively in our various markets; however, some of our grocery store, warehouse club and other mass and general retail merchandise
competitors are much larger in terms of overall sales volume and may have access to greater capital.

Our Strategy

Our strategy is to be the preferred provider for the lifetime needs of pets. Our primary initiatives include:

Create meaningful differentiation that drives brand preference. We are focused on
developing and strengthening our brand identity and enhancing the emotional connection pet parents make with their pets and with PetSmart. We remain committed to our promise of providing Total Lifetime CareSM for every pet, every parent, every time. We provide pet parents with
information, knowledge, trust and product solutions, including both exclusive and private label offerings, that help their pets live long, healthy and happy lives. Our marketing and advertising efforts focus on emphasizing our unique offerings for
customers and promoting our strong value proposition. Through extensive and on-going customer research, we are gaining valuable insights into the wants and needs of our customers and we are developing solutions and communication strategies to
address them. Our PetPerks® program, which is available in all our stores, plays a central role in this effort. We are also able to reach customers through various online communities and social networking sites. With increasingly greater
capacity to customize offers relevant to our customers, we believe we are helping them build a stronger, more meaningful bond with their pet and a greater loyalty to PetSmart.

Offer superior customer service. Our emphasis on the customer is designed to provide an unparalleled shopping
experience every time a customer visits our stores. Using a detailed associate learning curriculum and role-playing techniques, we train store associates to identify customer needs and provide appropriate solutions. We measure our success in every
store, and a portion of the annual incentive program for the store management team is linked to customer satisfaction. By providing pet parents with expertise and solutions, we believe we are strengthening our relationships with customers, building
loyalty and enhancing our leading market position, thus differentiating ourselves from grocery and other mass merchandisers.

Focus on operating excellence. Our commitment to operating
excellence emphasizes retail basics like store cleanliness, short check-out lines, a strong in-stock position, an effective supply chain and outstanding care of the pets in our stores, which allows us to provide a consistently superior customer
experience. This focus on operating excellence simplifies processes, makes our stores more efficient and easier to operate and allows associates to be more engaged and productive. We continually seek opportunities to strengthen our merchandising
capabilities allowing us to provide a differentiated product assortment, including pet specialty channel exclusive products and our proprietary brand offerings, to drive innovative solutions and value to our customers.

Grow our pet services business. Based on net services sales, we are North Americas leading specialty
provider of pet services, which includes professional grooming, training, boarding and day camp. Full-service veterinary hospitals are available in 799 of our stores, through our partnership with Banfield and other third parties in Canada. Pet
services are an integral part of our strategy, and we are focused on driving profitable growth in our services business. We believe services further differentiate us from our competitors, drive traffic and repeat visits to our stores, provide
cross-selling opportunities, allow us to forge a strong relationship with our customers, increase transaction size and enhance operating margins.

Add stores and provide the right store format to meet the needs of our customers. Our expansion strategy includes increasing our share in existing multi-store markets, penetrating new markets
and achieving operating efficiencies and economies of scale in merchandising, distribution, information systems, procurement, marketing and store operations. We continually evaluate our store format to ensure we are meeting the needs and
expectations of our customers, while providing a return on investment to our stockholders. A store format that emphasizes our highly differentiated products and pet services offerings, when combined with our other strategic initiatives, will
generally contribute higher comparable store sales growth (or sales in stores open at least one year), profitability and return on investment.

We believe these strategic initiatives will continue to drive comparable store sales and overall sales growth, allow us to focus on managing capital and leveraging costs and drive product margins to
produce profitability and return on investment for our stockholders.

Our Stores

Our stores are generally located at sites co-anchored by strong destination mass merchandisers and typically are in or
near major regional shopping centers. We are engaged in an ongoing expansion program, opening new stores in both new and existing markets and relocating existing stores. Store activity was as follows:

2011

2010

2009

Store count at beginning of year

1,187

1,149

1,112

New, or relocated stores opened

53

46

45

Stores closed

(8

)

(8

)

(8

)

Store count at end of year

1,232

1,187

1,149

Distribution

Our distribution network and information systems are designed to optimize store inventory, drive efficiencies in store labor, facilitate a high in-stock position and promote high distribution center
productivity. We operate two kinds of distribution centers: forward distribution centers and combination centers. Our forward distribution centers handle consumable products that require rapid replenishment, while our combination distribution
centers handle both consumable and non-consumable products. We believe the combination distribution centers drive efficiencies in transportation costs and store labor. Our suppliers generally ship merchandise to one of our distribution centers,
which receive and allocate merchandise to our stores. We contract the transportation of merchandise from our distribution centers to stores through third-party vendors.

Merchandise

Merchandise sales, which have been decreasing
as a percentage of net sales due to the higher growth rate in services, represented approximately 88.4%, 88.5% and 89.2% of our net sales in 2011, 2010 and 2009, respectively. Merchandise generally falls into three main categories:

Consumables. Consumables merchandise sales includes pet food, treats and litter. We emphasize super-premium, premium and
therapeutic dog and cat foods, many of which are not available in grocery stores, warehouse clubs or other mass and general retail merchandisers, as well as our private label foods. We also offer quality national brands traditionally found in
grocery stores, warehouse clubs or other mass merchandisers, and pet stores. Consumables merchandise sales comprised 52.8%, 52.5% and 53.4% of our net sales in 2011, 2010 and 2009, respectively.



Hardgoods. Hardgoods merchandise sales includes pet supplies and other goods. Our broad assortment of pet supplies, including
exclusive and private label products, includes collars, leashes, health care supplies, grooming and beauty aids, toys and apparel, as well as pet beds and carriers. We also offer a complete line of supplies for fish, birds, reptiles and small pets.
These products include aquariums and habitats, as well as accessories, décor and filters. Hardgoods merchandise sales comprised 33.9%, 34.4% and 34.0% of our net sales in 2011, 2010 and 2009, respectively.



Pets. Our stores feature fresh-water fish, small birds, reptiles and small pets. Pets comprised 1.7%, 1.6% and 1.8% of our net sales in
2011, 2010, and 2009, respectively. We do not sell dogs or cats, but provide space in all stores for adoption and animal welfare organizations.

Pet Services

Pet services, which include grooming,
training, boarding and day camp, represented 11.0%, 10.9% and 10.8% of our net sales in 2011, 2010 and 2009, respectively. Net sales from pet services increased 9.1% from $618.8 million in 2010 to $674.9 million in 2011.

We offer full-service, high quality grooming and training services in all our stores. We typically allocate approximately
900 square feet per store for grooming, including precision cuts, baths, nail trimming and grinding, and teeth brushing. Depending upon experience, our pet stylists are educated as part of a comprehensive program that teaches exceptional
grooming skills using safe and gentle techniques. Pet training services range from puppy classes to advanced or private courses, led by our accredited pet training instructors who are passionate about pets.

PetsHotels provide boarding for dogs and cats, which includes 24-hour supervision by caregivers who are PetSmart trained
to provide personalized pet care, an on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, as well as day camp for dogs. As of January 29, 2012, we operated 192 PetsHotels, and we plan to open 5
net new PetsHotels in 2012.

Veterinary Services

The availability of comprehensive veterinary care in many of our stores further differentiates us, drives sales in our
stores and reflects our overall commitment to pet care. Full-service veterinary hospitals in 799 of our stores offer routine examinations and vaccinations, dental care, a pharmacy and surgical procedures. As of January 29, 2012, Banfield
operated 791 of the hospitals under the registered trade name of Banfield, The Pet Hospital. The remaining 8 hospitals are located in Canada and are operated by other third parties. See Note 5 in the Notes to the Consolidated
Financial Statements for a discussion of our ownership interest in Banfield.

PetSmart Charities® and Adoptions

PetSmart Charities, Inc., an independent, nonprofit 501(c)(3) organization and the largest funder of animal-welfare grants
in North America, creates and supports programs that save the lives of homeless pets and raise awareness of companion animal-welfare issues. PetSmart Charities creates and supports programs to end the euthanasia of adoptable pets and to help find a
lifelong loving home for every pet by:



Facilitating the largest collective pet adoption program in North America that is responsible for approximately 400,000 adoptions annually and
nearly 5 million since 1994. PetSmart Charities Adoption Centers are located in every PetSmart store in the United States, Canada and Puerto Rico, where local animal-welfare agencies use space donated by PetSmart to find homes for cats and
dogs.



Providing grant funding to animal-welfare agencies for spay/neuter efforts that have helped reduce the homeless-pet population, shelter intake and
euthanasia.



Operating life-saving programs such as the Rescue Waggin® dog transport program and emergency relief assistance for pets affected by
large-scale natural disasters and man-made emergencies.

Since 1994, PetSmart Charities has funded more than $165 million in
grants and programs benefiting animal-welfare organizations.

Government Regulation

We are subject to various federal, state, provincial and local laws and regulations governing, among other things: our
relationships with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements; veterinary practices or the operation of veterinary hospitals in retail stores that may impact our ability to operate
veterinary hospitals in certain facilities; the transportation, handling and sale of small pets; the generation, handling, storage, transportation and disposal of waste and biohazardous materials; the manufacturing and distribution, import/export
and sale of products; the handling, security, protection and use of customer and associate information; and the licensing and certification of services.

We seek to structure our operations to comply with all federal, state, provincial and local laws and regulations of each jurisdiction in which we operate. Given varying and uncertain interpretations of
these laws and regulations, and the fact the laws and regulations are enforced by the courts and regulatory authorities with broad discretion, we can make no assurances we would be found to be in compliance in all jurisdictions at all times. We also
could be subject to costs, including fines, penalties or sanctions and third-party claims as a result of violations of, or liabilities under, these laws and regulations.

Intellectual Property

We believe our intellectual property
has significant value and is an important component in our merchandising and marketing strategies. Some of our intellectual property includes numerous servicemarks and trademarks registered with the United States Patent and Trademark Office, or
USPTO, including: PetSmart®, PetSmart.com®, PetSmart PetsHotel®, PetPerks®, and Where Pets Are Family®, as well as many others. We also have several servicemark and trademark applications that are pending with the
USPTO and anticipate filing additional applications in the future. We also own numerous registered servicemarks, trademarks and pending applications in other countries, including Canada, as well as several trade names, domain names and copyrights
for use in our business.

Employees

As of January 29, 2012, we employed approximately 50,000 associates, of which approximately 23,000 were employed full-time. We continue to invest in education and training for our full and part-time
associates as part of our emphasis on customer service and providing pet care solutions. We are not subject to collective bargaining agreements and have not experienced work stoppages. We consider our relationship with our associates to be a
positive one.

Financial Information by Business Segment and Geographic Data

Operating segments are components of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Utilizing these criteria, we manage our business on the basis of one reportable operating segment.

Net sales in the United States and Puerto Rico were $5.8 billion, $5.4 billion and $5.1 billion for 2011,
2010 and 2009, respectively. Net sales in Canada, denominated in United States dollars, were $0.3 billion, $0.3 billion and $0.2 billion for 2011, 2010 and 2009, respectively. Substantially all our long-lived assets are located in the United States.

Available Information

We make available, free of charge through our investor relations internet website (www.petm.com), our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, including our XBRL
instance documents, our current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file such material, or furnish it to the Securities and Exchange Commission, or SEC.

The public may read and copy materials that we file with the SEC at the SECs Public Reference Room at
100 F Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet website (www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Robert F. Moran was appointed Chairman effective January 30, 2012 and has
been our Chief Executive Officer since June 2009. He joined PetSmart as President of North American Stores in July 1999 and in December 2001, he was appointed President and Chief Operating Officer. From 1998 to 1999, he was President of Toys
R Us, Ltd., Canada. Prior to 1991 and from 1993 to 1998, for a total of 20 years, he was with Sears, Roebuck and Company in a variety of financial and merchandising positions, including President and Chief Executive Officer of Sears
de Mexico. He was also Chief Financial Officer and Executive Vice President of Galerias Preciados of Madrid, Spain from 1991 through 1993. Mr. Moran currently also serves on the boards of directors for Medical Management International, Inc.,
Collective Brands, Inc. and the Retail Industry Leaders Association.

David K. Lenhardt was appointed
President and Chief Operating Officer effective January 30, 2012. He joined PetSmart as Senior Vice President of Services, Strategic Planning and Business Development in October 2000. He was appointed Senior Vice President, Store Operations and
Services in February 2007 and in February 2009 was appointed Senior Vice President, Store Operations and Human Resources. In January 2011, he was appointed Executive Vice President, Store Operations, Human Resources and Information Systems. From
1996 to 2000, he was a manager with Bain & Company, Inc., where he led consulting teams for retail, technology and e-commerce clients. Prior to that, he worked in the corporate finance and Latin American groups of Merrill Lynch &
Co., Inc.s investment banking division.

Lawrence P. Molloy joined PetSmart as Senior Vice
President and Chief Financial Officer in September 2007 and was appointed Executive Vice President effective January 30, 2012. As the Executive Vice President, Chief Financial Officer, his duties include oversight of the finance, real estate
and legal departments. Prior to joining PetSmart, he was employed by Circuit City Stores, Inc, a national consumer electronics retailer, from 2003 to 2007. While at Circuit City, he served as the Director of Financial Planning and Analysis from 2003
to 2004, the Vice President, Financial Planning and Analysis from 2004 to 2006 and from 2006 to 2007 was Chief Financial Officer of retail. Prior to Circuit City, he served in various leadership, planning and strategy roles for Capital One Financial
Corporation; AGL Capital Investments, LLC; Deloitte & Touche Consulting Group; and the United States Navy. He served ten years in the Navy as a fighter pilot, later retiring from the Navy Reserve with a rank of Commander.

Joseph D. OLeary was appointed Executive Vice President, Merchandising, Marketing, Supply Chain and
Strategic Planning in January 2011. He joined PetSmart as Senior Vice President of Supply Chain in September 2006. From October 2008 to March 2010, he held the title of Senior Vice President, Merchandising and Supply Chain. From March 2010 to
January 2011, he held the title of Senior Vice President, Merchandising. Prior to joining PetSmart, he was Chief Operating Officer for Interactive Health LLC, a manufacturer of robotic massage chairs. Prior to that, he served as Senior Vice
President of Supply Chain Strategy and Global Logistics for the Gap, Inc. from 2003 to 2005, and Senior Vice President of Global Logistics from 2000 to 2003. Prior to 1999, he held positions at Mothercare plc, Coopers & Lybrand LLP and BP
International.

John W. Alpaugh was appointed Senior Vice President, Chief Marketing Officer in
February 2010. He joined PetSmart in 1999 and has served in a number of leadership roles including Vice President, Marketing from February 2006 to April 2007, Vice President, Specialty Merchandising from April 2007 to March 2008, and from April 2008
to February 2010, Vice President of Strategic Planning and Business Development. Prior to joining PetSmart, he worked in Brand Management for Procter & Gamble Europe and in Financial Planning and Analysis for IBM.

Donald E. Beaver joined PetSmart as Senior Vice President and Chief
Information Officer in May 2005. Prior to joining PetSmart, he was employed by H.E. Butt Grocery Company where he held the position of Senior Vice President and Chief Information Officer starting in 1999. Prior to that, he served 14 years at
Allied Signal Aerospace, Inc. in various information systems leadership roles, the last being the CIO for the aftermarket support division.

Gene Eddie Burt II was appointed Senior Vice President, Supply Chain effective January 30, 2012. He joined PetSmart in April 2007 and served as the Vice President of Distribution until
December 2009 when he was promoted to Vice President of Distribution and Transportation. Prior to joining PetSmart, he served as the Director for Domestic Distribution for Home Depot from October 2004 to April 2007. Prior to that, he served in
various supply chain leadership roles with Target Corporation.

Matthew R. McAdam was appointed Senior
Vice President, Merchandising effective January 30, 2012. He joined PetSmart in September 2008 as the Vice President of Merchandising, Hardgoods. Prior to joining PetSmart, he served as the Vice President of Merchandising Planning and
Allocation for Kohls Department Stores from June 2005 to September 2008. Previously, he held various merchandising roles at the Bon-Ton Stores, Inc. and The May Department Stores Company.

Jaye D. Perricone was appointed Senior Vice President, Real Estate and Development in December 2007, serving as
Vice President, Real Estate during the year prior. She joined PetSmart in 1995, and served in a number of leadership roles including Regional Vice President from 1997 to 2000, Vice President of Services Operations from 2000 to 2001, Vice President
of Customer Service and Store Operations from 2001 to 2004 and Vice President of Property Management and Store Design from 2004 to 2006. Prior to joining PetSmart, she held various positions with Target Corporation, Pace Membership Warehouse, Inc.
and Bizmart, Inc.

Neil H. Stacey was appointed Senior Vice President of Human Resources in February
2009. He joined PetSmart in 1995 and served in a number of leadership roles including Vice President General Merchandise Manager from 1995 to 1999, Senior Vice President of Merchandising Consumables from 1999 to 2000, Regional Vice President from
2000 to 2007, and Divisional Vice President of Operations from 2007 to 2009. Prior to joining PetSmart, he was employed at American Stores Company, a national food and drug retailer, where he held several leadership positions including Vice
President of Advertising and Market Development, Vice President of Merchandising and Vice President of Business Process Redesign.

Bruce K. Thorn was appointed Senior Vice President, Store Operations and Services effective January 30, 2012. He joined PetSmart in 2007 as Vice President, Supply Chain Solutions, and served
as Vice President, Supply Chain from 2008 until December 2009 when he was promoted to Senior Vice President, Supply Chain. From 2002 through 2007, he held leadership roles, including Chief Operating Officer from 2005 to 2007, for LESCO, Inc., prior
to its merger with Deere & Company. He previously held leadership roles with Gap, Inc., Cintas Corporation and the United States Army.

Melvin G. Tucker was appointed Senior Vice President, Finance effective January 30, 2012. He joined PetSmart as Vice President of Financial Planning and Analysis in December 2008. Prior to
joining PetSmart, he served as Vice President of Financial Planning and Analysis at Circuit City Stores, Inc. from May 2005 to November 2008. Prior to Circuit City, he served in various finance leadership roles at Home Depot from April 1990 until
April 2005.

In the normal course of business, our operations, financial condition and results of operations are routinely subjected
to a variety of risks. Our actual financial results could differ materially from projected results due to some or all of the factors discussed below. You should carefully consider the risks and uncertainties described below, as well as those
discussed in the Competition, Our Stores, Distribution and Government Regulation sections of this Annual Report on Form 10-K. In addition, current global economic conditions may amplify many of
these risks.

A decline in consumer spending or a change in consumer preferences could reduce our sales or
profitability and harm our business.

Our sales depend on consumer spending, which is influenced by
factors beyond our control, including general economic conditions, the availability of discretionary income and credit, consumer confidence, tax or interest rate fluctuations, fuel and other energy costs, healthcare costs, weather and unemployment
levels. Global or national political unrest or uncertainty may also impact the price paid by consumers for goods, services and commodities and reduce consumer spending and confidence, and reduce our sales or profitability. We may experience declines
in sales or changes in the types of products sold during economic downturns. Any material decline in the amount of consumer spending could reduce our sales, and a decrease in the sales of higher-margin products could reduce profitability and, in
each case, harm our business. The success of our business depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences. Failure to timely identify or effectively respond to changing consumer
tastes, preferences and spending patterns, as well as pet ownership trends and pet care needs could adversely affect our business and financial results.

The pet products and services retail industry is very competitive and continued competitive forces may adversely impact our business and financial results.

The pet products and services retail industry is very competitive. We compete with supermarkets, warehouse clubs and
other mass and general retail merchandisers, many of which are larger and have significantly greater resources than we have. We also compete with a number of specialty pet supply stores and independent pet stores, veterinarians, catalog retailers
and e-commerce retailers. The pet products and services retail industry has become increasingly competitive due to the expansion of pet-related product offerings by certain supermarkets, warehouse clubs and other mass and retail merchandisers and
the entrance of other specialty retailers into the pet food and pet supply market, some of which have developed store formats similar to ours. We can make no assurances we will not face greater competition from these or other retailers in the
future, and changes in their merchandising and operational strategies could impact our sales and profitability. In particular, if supermarket, warehouse club or other mass and retail merchandiser competitors seek to gain or retain market share by
reducing prices, we would likely reduce our prices on similar product offerings in order to remain competitive, which may result in a decrease in our market share, sales, operating results and profitability and require a change in our operating
strategies.

We also have been able to compete successfully by differentiating ourselves from our competitors
through providing a careful combination of product assortment, competitive pricing, service offerings and unique customer experience. If changes in consumer preferences decrease the competitive advantage attributable to these factors, or if we fail
to otherwise positively differentiate our customer experience from our competitors, our business and results of operations could be adversely affected.

Comparable store sales growth may decrease. If we are unable to increase sales at our existing stores, our results of operations could be harmed.

We can make no assurances that our stores will meet forecasted levels of sales and profitability. As a result of new
store openings in existing markets, and because older stores will represent an increasing proportion of our store base over time, our comparable store sales performance may be materially impacted in future periods. In addition, a portion of a
typical new stores sales comes from customers who previously shopped at other PetSmart stores in the existing market.

We may be unable to continue to open new stores and enter new markets successfully. If we are unable to successfully reformat
existing stores and open new stores, our results of operations could be harmed. Also, store development may place increasing demands on management and operating systems and may erode sales at existing stores.

We currently operate stores in most of the major market areas of the United States and Canada. Our ability to be
successful with our store development efforts is dependent on various factors, some of which are outside our control, including:

Our ability to reformat existing stores in a manner that achieves appropriate returns on our investment.

To the extent we are unable to accomplish any of the above, our ability to open new stores and hotels or reformat
existing ones may be harmed and our future sales and profits may be adversely affected. In addition, we can make no assurances that we will be able to meet the forecasted level of sales or operate our new stores or hotels profitably.

The increased demands placed on existing systems and procedures, and on management by our store development plans, also
could result in operational inefficiencies and less effective management of our business and associates, which could in turn adversely affect our financial performance. Opening new stores in a market will attract some customers away from other
stores already operated by us in that market and diminish their sales. An increase in construction costs and/or building material costs could also adversely affect our financial performance.

Our leases are typically signed approximately 8 months before a store opens. As a result of that timing, we may be unable
to adjust our store opening schedule to new economic conditions or a change in strategy in a timely manner.

Our
quarterly operating results may fluctuate due to seasonal changes associated with the pet products and services retail industry and the timing of expenses, new store openings and store closures.

Our business is subject to seasonal fluctuation. We typically realize a higher portion of our net sales and operating
profit during the fourth fiscal quarter. Sales of certain products and services are seasonal and because our stores typically draw customers from a large area, sales may also be impacted by adverse weather or travel conditions, which are more
prevalent during certain seasons of the year. As a result of this seasonality, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of
future performance. Also, controllable expenses, such as advertising, may fluctuate from quarter to quarter within a year. As a result of our expansion plans, the timing of new store openings and related preopening expenses, the amount of revenue
contributed by new and existing stores, and the timing and estimated obligations of store closures, our quarterly results of operations may fluctuate. Finally, because new stores tend to experience higher payroll, advertising and other store level
expenses, as a percentage of net sales, than mature stores, new store openings will also contribute to lower store operating margins until these stores become established.

Failure to successfully manage and execute our marketing initiatives could have a negative impact on our business.

Our continued success and growth depend on cultivating a growing, loyal customer base, improving customer traffic and
increasing the average transaction amount to gain sales momentum in our stores and on our e-commerce web site. Historically, we have utilized various media to reach the consumer, and we have experienced varying responses to our marketing efforts. We
may not be able to successfully execute our marketing initiatives to realize the intended benefits and growth prospects due to factors outside of our control such as increased competition or economic deterioration, thus limiting our ability to
capitalize on business opportunities and expand our business. Also, our inability to accurately predict our customers preferred method of communication or the customers acceptance of our marketing initiatives could result in the failure
to drive sales growth and thereby impact our business and financial performance.

A disruption, malfunction or increased
costs in the operation, expansion or replenishment of our distribution centers or our supply chain would impact our ability to deliver to our stores or increase our expenses, which could harm our sales and results of operations.

Our vendors generally ship merchandise to one of our distribution centers,
which receive and allocate merchandise to our stores. Any interruption or malfunction in our distribution operations, including, but not limited to, disruptions to the transportation infrastructure, the loss of a key vendor that provides
transportation of merchandise to or from our distribution centers, the failure of a key vendor to deliver on its commitments, or a material increase in our transportation and distribution costs, including, but not limited to, costs resulting from
increases in the price of fuel and other energy costs or other commodities, could harm our sales and the results of our operations. We seek to optimize inventory levels to operate our business successfully. An interruption in the supply chain could
result in out-of-stock or excess merchandise inventory levels that could harm our sales and the results of operations. We operate four fish distribution centers and have one fish distribution center that is operated by a third-party vendor. An
interruption or malfunction in these operations or in the fulfillment of fish orders could harm our sales and results of operations. Operating the fish distribution centers is a very complex process, and if we lose the third-party operator, we can
make no assurances that we could contract with another third-party to operate the fish distribution center on favorable terms, if at all, or that we could successfully operate all of the fish distribution centers ourselves. In addition, our growth
plans require the development of new distribution centers to service the increasing number of stores. If we are unable to successfully expand our distribution network in a timely manner, our sales or results of operations could be harmed.

Failure to successfully manage our inventory could harm our business.

We are exposed to inventory risks that may adversely affect our operating results as a result of seasonality, new product
launches, changes in customer preferences or demand and consumer spending patterns with respect to our products. We endeavor to accurately predict these trends and avoid overstocking or under stocking products that we sell. Demand for products,
however, can change between the time inventory is ordered and the date of sale. In addition, when we begin selling a new product, it may be difficult to establish vendor relationships, determine appropriate product selection, and accurately forecast
demand. We carry a broad selection of certain products and we may be unable to sell products in sufficient quantities or during the relevant selling seasons. Any one of the inventory risk factors set forth above may adversely affect our business and
financial results.

If our information systems fail to perform as designed or are interrupted for a significant period
of time, our business could be harmed.

The efficient operation of our business is dependent on our
information systems. In particular, we rely on our information systems to effectively manage our financial and operational data, process payroll, manage the supply chain and to maintain our in-stock positions. We possess disaster recovery
capabilities for our key information systems, and take measures intended to prevent security breaches and computer viruses. However, the failure of our information systems to perform as designed, due to failure to manage disasters, security
breaches, computer viruses or any other interruption of our information systems for a significant period of time could disrupt our business.

We continue to invest in our information systems. Enhancement to or replacement of our major financial or operational information systems could result in disruption of normal operating processes and
procedures and have a significant impact on our ability to conduct our core business operations. We can make no assurances that the costs of enhancement to or replacement of our information systems will not exceed estimates, that the systems will be
implemented without material disruption, or that the systems will be as beneficial as predicted. If any of these events occur, our results of operations could be harmed.

If we fail to protect the integrity and security of customer and associate information, our business could be adversely impacted.

The increasing costs associated with the implementation and on-going operation of our information security systems, such
as increased investment in technology, the costs of compliance with privacy and information security laws, and costs resulting from potential data loss, could adversely impact our business. We also routinely possess sensitive customer and associate
information and, while we have taken reasonable and appropriate steps to protect that information from security breaches, data loss and computer viruses, if our security procedures and controls were compromised, unintentionally or through
cyber-attacks, it could harm our business, consumer confidence, reputation, operating results and financial condition, result in litigation and may increase the costs we incur to protect against such information security breaches.

The disruption of the relationship with or the loss of any of our key vendors, including our vendors with whom we have exclusive
relationships, a decision by our vendors to make their products available in supermarkets or through warehouse clubs and other mass and retail merchandisers, the inability of our vendors to provide quality products in a timely or cost-effective
manner, the availability of generic products, or risks associated with the suppliers from whom products are sourced, all could harm our business.

Sales of premium pet food for dogs and cats comprise a significant portion
of our net sales. Currently, most major vendors of premium pet food do not permit their products to be sold in supermarkets, warehouse clubs, or through other mass and retail merchandisers. If any premium pet food or pet supply vendor were to make
its products available in supermarkets, warehouse clubs and other mass or retail merchandisers, our business could be harmed. In addition, if the grocery brands currently available to such retailers were to gain market share at the expense of
the premium brands sold only through specialty pet food and pet supply outlets, our business could be harmed.

We purchase a substantial amount of pet supplies from a number of vendors with limited supply capabilities, and two of
our largest vendors account for a material amount of products sold. We can make no assurances that we will be able to find new qualified vendors who meet our standards, or that our current pet supply vendors will be able to accommodate our
anticipated needs or comply with existing or any new regulatory requirements. In addition, we purchase a substantial amount of pet supplies from vendors outside of the United States. Effective global sourcing of many of the products we sell is an
important factor in our financial performance. We can make no assurances that our international vendors will be able to satisfy our requirements including, but not limited to, timeliness of delivery, acceptable product quality, and accurate
packaging and labeling. Any inability of our existing vendors to provide products meeting such requirements in a timely or cost-effective manner could harm our business. While we believe our vendor relationships are good, we have no material
long-term supply commitments from our vendors and any vendor could discontinue selling to us at any time.

Many factors relating to our vendors and the countries in which they are located are beyond our control, including the
stability of their political, economic and financial environments, their ability to operate in challenging economic environments or meet our standards and applicable U.S. and local legal requirements, the availability of labor and raw materials,
labor unrest, merchandise quality issues, currency exchange rates, trade restrictions, transport availability and cost, inflation and other factors. In addition, Canadas and the United States foreign trade policies, tariffs and other
impositions on imported goods, trade sanctions imposed on certain countries, the limitation on the import of certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade are beyond
our control. These factors affecting our vendors and our access to products could adversely affect our operations and our financial performance.

Our expanded offering of proprietary branded products may not improve our financial performance and may expose us to product liability claims.

We offer various proprietary branded products, for which we rely on third-party manufacturers. Such third-party
manufacturers may prove to be unreliable, or the quality of the products may not meet our expectations. In such event, we may have increased exposure for quality-related claims or losses caused by such products. In addition, our proprietary branded
products compete with other manufacturers branded items that we offer. As we continue to evaluate the number and types of proprietary branded products that we sell, we may adversely affect our relationships with our vendors, who may decide to
reduce their product offerings through us and increase their product offerings through our competitors. An increase in our proprietary branded product offerings also exposes us to risk that third parties will assert infringement claims against us
with respect to such products, and we may be unable to fully protect our intellectual property rights on our proprietary branded products. Finally, if any of our customers are harmed by our proprietary branded products, they may bring product
liability and other claims against us. Any of these circumstances could have an adverse effect on our business and financial performance.

Food safety, quality and health concerns could affect our business.

We could be adversely affected if consumers lose confidence in the safety and quality of vendor-supplied food products and hard-good products. All of our vendors are required to comply with applicable
product safety laws, and we are dependent upon them to ensure such compliance. Adverse publicity about these types of concerns, whether valid or not, may discourage consumers from buying the products in our stores or cause vendor production and
delivery disruptions. The real or perceived sale of contaminated food products by us could result in product liability claims against our vendors or us, expose us or our vendors to governmental enforcement action or private litigation, or lead to
costly recalls and a loss of consumer confidence, any of which could have an adverse effect on our sales and operations and financial performance.

We depend on key executives, store managers and other personnel and may not be able to retain or replace these employees or recruit additional qualified personnel, which could harm our business.

Our success is largely dependent on the efforts and abilities of our senior
executive group and other key personnel. The loss of the services of one or more of our key executives or personnel could adversely impact our financial performance and our ability to execute our strategies. In addition, our future success depends
on our ability to attract, train, manage and retain highly skilled store managers and qualified services personnel such as pet trainers and groomers. There is a high level of competition for these employees and our ability to operate our stores and
expand our services depends on our ability to attract and retain these personnel. Competition for qualified management and services personnel could require us to pay higher wages or other compensation to attract a sufficient number of employees.
Turnover, which has historically been high among entry-level or part-time associates at our stores and distribution centers, increases the risk associates will not have the training and experience needed to provide competitive, high-quality customer
service. Our ability to meet our labor needs while controlling our labor costs is subject to numerous external factors, including unemployment levels, prevailing wage rates, changing demographics and changes in employment legislation. If we are
unable to retain qualified associates or our labor costs increase significantly, our business operations and our financial performance could be adversely impacted.

Our international operations may result in additional market risks, which may harm our business.

We operate stores outside of the United States. As these operations grow, they may require greater management and financial resources. International operations require the integration of personnel with
varying cultural and business backgrounds and an understanding of the relevant differences in the cultural, legal and regulatory environments. Our results may be increasingly affected by the risks of our international activities, including:

The burden of complying with foreign laws, including tax laws and financial accounting standards; and



Political and economic instability and developments.

Our business may be harmed if the operation of veterinary hospitals at our stores is limited or fails to continue.

We and Banfield, the third-party operator of Banfield, The Pet Hospital, and our other third-party operators are subject
to statutes and regulations in various states and Canadian provinces regulating the ownership of veterinary practices, or the operation of veterinary hospitals in retail stores, that may impact our ability to host and Banfields ability to
operate veterinary hospitals within our facilities. A determination that we, or Banfield, are in violation of any of these applicable statutes and regulations could require us, or Banfield, to restructure our operations to comply, or render us, or
Banfield, unable to operate veterinary hospitals in a given location. If Banfield were to experience financial or other operating difficulties that would force it to limit its operations, or if Banfield were to cease operating the veterinary
hospitals in our stores, our business may be harmed. We can make no assurances that we could contract with another third-party to operate the veterinary hospitals on favorable terms, if at all, or that we could successfully operate the veterinary
hospitals ourselves. In addition, due to our equity investment in Banfield, any significant decrease in Banfields financial results may negatively impact our financial position.

We face various risks as an e-commerce retailer.

We may require additional capital in the future to sustain or grow our e-commerce business. We have engaged a third-party
to maintain our e-commerce website and process all customer orders placed through that site. Business risks related to our e-commerce business include our ability to keep pace with rapid technological change; failure in our, or any third-party
processors, security procedures and operational controls; failure or inadequacy in our, or any third-party processors, systems or ability to process customer orders; government regulation and legal uncertainties with respect to
e-commerce; and collection of sales or other taxes by one or more states or foreign jurisdictions. If any of these risks materialize, it could have an adverse effect on our business.

Our business could be harmed if we were unable to effectively manage our cash flow and
raise any needed additional capital on acceptable terms.

We expect to fund our currently planned
operations with existing capital resources, including cash flows from operations and the borrowing capacity under our credit facility. If, however, we are unable to effectively manage our cash flows or generate and maintain positive operating cash
flows and operating income in the future, we may need additional funding. We may also choose to raise additional capital due to market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future
operating plans. Our credit facility and letter of credit facility are secured by substantially all our personal property assets, our subsidiaries and certain real property. This could limit our ability to obtain, or obtain on favorable terms,
additional financing and may make additional debt financing outside our credit facility and letter of credit facility more costly. If additional capital were needed, an inability to raise capital on favorable terms could harm our business and
financial condition. In addition, to the extent that we raise additional capital through the sale of equity or debt securities convertible into equity, the issuance of these securities could result in dilution or accretion to our stockholders.

Failure to successfully integrate any business we acquire could have an adverse impact on our financial results.

We may, from time to time, acquire businesses we believe to be complementary to our business.
Acquisitions may result in difficulties in assimilating acquired companies and may result in the diversion of our capital and our managements attention from other business issues and opportunities. We may not be able to successfully integrate
operations that we acquire, including their personnel, financial systems, distribution, operations and general operating procedures. If we fail to successfully integrate acquisitions, we could experience increased costs associated with operating
inefficiencies which could have an adverse effect on our financial results. Also, while we employ several different methodologies to assess potential business opportunities, the new businesses may not meet or exceed our expectations and, therefore,
affect our financial performance.

Failure to protect our intellectual property could have a negative impact on our
operating results.

Our trademarks, servicemarks, copyrights, patents, trade secrets, domain names and
other intellectual property are valuable assets that are critical to our success. The unauthorized reproduction or other misappropriation of our intellectual property could diminish the value of our brands or goodwill and cause a decline in our
revenue or operating results. Protecting our intellectual property outside the United States could be time-consuming and costly, and the local laws and regulations outside the United States may not fully protect our rights in such intellectual
property. Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to enter into royalty or licensing agreements. As
a result, any such claim could have an adverse effect on our operating results.

A determination that we are in
violation of any contractual obligations or government regulations could result in a disruption to our operations and could impact our financial results.

We are subject to various contractual obligations with third-party providers and federal, state, provincial and local
laws and regulations governing, among other things: our relationships with employees, including minimum wage requirements, overtime, terms and conditions of employment, working conditions and citizenship requirements; veterinary practices, or the
operation of veterinary hospitals in retail stores, that may impact our ability to operate veterinary hospitals in certain facilities; the transportation, handling and sale of small pets; the generation, handling, storage, transportation and
disposal of waste and biohazardous materials; the distribution, import/export and sale of products; providing services to our customers; contracted services with various third-party providers; environmental regulation; credit and debit card
processing; the handling, security, protection and use of customer and associate information; and the licensing and certification of services.

We seek to structure our operations to comply with all applicable federal, state, provincial and local laws and regulations of each jurisdiction in which we operate. Given varying and uncertain
interpretations of these laws and regulations and the fact that the laws and regulations are enforced by the courts and by regulatory authorities with broad discretion, we can make no assurances that we would be found to be in compliance in all
jurisdictions. We also could be subject to costs, including fines, penalties or sanctions and third-party claims as a result of violations of, or liabilities under, the above referenced contracts, laws and regulations.

Failure of our internal controls over financial reporting could harm our business and financial results.

We have documented and tested our internal controls over financial reporting to assess their design and operating
effectiveness. Internal controls over financial reporting have inherent limitations and are not intended to provide absolute assurance that a

misstatement of our financial statements would be prevented or detected. We may encounter problems or delays in completing the review and evaluation, or implementing improvements. Additionally,
we may identify deficiencies that need to be addressed in our internal controls over financial reporting, or other matters that may raise concerns for investors. Should we, or our independent registered public accounting firm, determine in future
periods that we have a material weakness in our internal controls over financial reporting, our results of operations or financial condition may be adversely affected and the price of our common stock may decline.

Accounting principles generally
accepted in the United States of America, or GAAP, and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters relevant to our business are highly complex, continually
evolving and involve many subjective assumptions, estimates and judgments by us. Changes in these rules or their interpretation, or changes in facts, underlying assumptions, estimates or judgments could significantly impact our reported or expected
financial performance.

An unfavorable determination by tax regulators may cause our provision for income and other
taxes to be inadequate and may result in a material impact to our financial results.

We are subject
to periodic audits and examinations by the Internal Revenue Service, state, local or provincial taxing authorities. Outcomes from the tax audits or examinations that we may be subject to in any jurisdiction in which we operate, or changes in the tax
laws in any of the multiple jurisdictions in which we operate could result in an unfavorable change in our effective tax rate which could have an adverse effect on our business and financial results.

Failure to obtain commercial insurance at acceptable prices or failure to adequately reserve for self-insured exposures might have
a negative impact on our business.

We procure insurance to help us manage a variety of risks. A
failure of insurance to provide coverage for these risks may expose us to expensive defense costs and the costs of the ultimate outcome of the matter. Insurance costs continue to be volatile, affected by natural catastrophes, fear of terrorism,
financial irregularities and fraud at other publicly traded companies and fiscal viability of insurers. We believe that commercial insurance coverage is prudent for risk management, and insurance costs may increase substantially in the future. In
addition, for certain types or levels of risk, such as risks associated with earthquakes, hurricanes or terrorist attacks, we may determine that we cannot obtain commercial insurance at acceptable prices. Therefore, we may choose to forego or limit
our purchase of relevant commercial insurance, choosing instead to self-insure one or more types or levels of risks. Provisions for losses related to self-insured risks are based upon independent actuarially determined estimates. We maintain
stop-loss coverage to limit the exposure related to certain risks. The assumptions underlying the ultimate costs of existing claim losses are subject to a high degree of unpredictability, which can affect the liability recorded for such claims. For
example, variability in inflation rates of health care costs inherent in these claims can affect the amounts realized. Similarly, changes in legal trends and interpretations, as well as a change in the nature and method of how claims are settled can
impact ultimate costs. Although our estimates of liabilities incurred do not anticipate significant changes in historical trends for these variables, any changes could have a considerable effect upon future claim costs and currently recorded
liabilities and could have a material impact on our consolidated financial statements.

Pending legislation, weather,
catastrophic events, disease, or other factors, could disrupt our operations, supply chain and the supply of small pets and products we sell, which could harm our reputation and decrease sales.

There is generally a significant amount of legislation pending at the federal, state, provincial and local levels
regarding the handling of pets. This legislation may impair our ability to transport the small pets we sell in our stores. The small pets we sell in our stores are susceptible to health risks and diseases that can quickly decrease or destroy the
supply of these pets. In addition, our supply of products may be negatively impacted by weather, catastrophic events, disease, supply chain malfunctions, contamination or trade barriers. Any disruption in our operations or the supply of products to
our stores could harm our reputation and decrease our sales.

Fluctuations in the stock market, as well as general
economic and market conditions, may impact our operations, sales, financial results and market price of our common stock.

Over the last several years, the market price of our common stock has been subject to significant fluctuations. The market price of our common stock may continue to be subject to significant fluctuations
in response to the impact on our operations, sales and financial results of a variety of factors including, but not limited to:

Actions taken by our competitors, including new product introductions and pricing changes;



Changes in the strategy and capability of our competitors;



Our ability to successfully integrate acquisitions;



The prospects of our industry;



Natural disasters, hostilities and acts of terrorism; and



National or regional catastrophes or circumstances, such as a pandemic or other public health or welfare scare.

In addition, the stock market in recent years has experienced price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies. These fluctuations, as well as general economic and market conditions, including but not limited to those listed above, may harm the market price of our common stock. Further,
a change in an analysts published opinion or rating of our business could impact the market price of our common stock.

Continued volatility and disruption to the global capital and credit markets may adversely affect our ability to access credit and
the financial soundness of our suppliers.

Financial turmoil affecting the banking system and
financial markets and the risk that additional financial institutions may consolidate or become insolvent has resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and volatility in credit, currency and
equity markets. In such an environment, there is a risk that lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments,
including but not limited to: extending credit up to the maximum permitted by credit facility, allowing access to additional credit features and otherwise accessing capital and/or honoring loan commitments. If our lender fails to honor its legal
commitments under our credit facility, it could be difficult in this environment to replace our credit facility on similar terms. And if our suppliers or key third party vendors of necessary services and technical systems encounter similar
difficulties with credit or liquidity in their own businesses, our business may also be adversely affected.

We have
implemented some anti-takeover provisions that may prevent or delay an acquisition of us that may not be beneficial to our shareholders.

Our restated certificate of incorporation and bylaws include provisions that may delay, defer or prevent a change in management or control that our shareholders may not believe is in their best interests.
These provisions include:



The ability of our board of directors to issue, without stockholder approval, up to 10,000,000 shares of preferred stock in one or more series
with rights, obligations and preferences determined by the board of directors;



No right of stockholders to call special meetings of stockholders;



No right of stockholders to act by written consent;



Certain advance notice procedures for nominating candidates for election to the board of directors; and

We are also subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, and the application of Section
203 could delay or prevent an acquisition of PetSmart.

Item 1B. Unresolved Staff
Comments

None.

Item 2. Properties

Our stores are generally located at sites co-anchored by strong destination superstores and typically are in or near major regional shopping centers. The following table summarizes the locations of the
stores by country and state or territory as of January 29, 2012:

We lease substantially all of our stores, distribution centers, and
corporate offices under non-cancelable leases. The terms of the store leases generally range from 10 to 15 years and typically allow us to renew for 2 to 4 additional 5 year terms. Store leases, excluding renewal options, expire at various
dates through 2027. Certain leases require payment of property taxes, utilities, common area maintenance, and insurance. If annual sales at certain stores exceed specified amounts, certain leases provide for additional rent.

We lease approximately 365,000 square feet for our corporate offices. The lease expires in 2023.

Our distribution centers and respective lease expirations as of January 29, 2012, were as follows:

Location

SquareFootage

Date Opened

Distribution Type

Lease Expiration

(In thousands)

Ennis, Texas

230

May 1996

Forward distribution center

2017

Phoenix, Arizona

620

November 1999

Combination distribution center

2021

Columbus, Ohio

613

September 2000

Combination distribution center

2015

Gahanna, Ohio

276

October 2000

Forward distribution center

2015

Hagerstown, Maryland

252

October 2000

Forward distribution center

2015

Ottawa, Illinois

1,000

August 2005

Combination distribution center

2022

Newnan, Georgia

878

July 2007

Combination distribution center

2022

Reno, Nevada

873

April 2008

Combination distribution center

2023

Total

4,742

Item 3. Legal Proceedings

In January 2011, we were named as a defendant in Pedroza v. PetSmart, Inc., et al., a lawsuit originally filed in
California Superior Court for the County of San Bernardino. The case has been removed to the U.S. District Court for the Central District of California. The complaint alleges, purportedly on behalf of current and former exempt store management in
California, that we improperly classified our store management as exempt pursuant to the California Labor Code, and as a result failed to: (i) pay or provide to such managers proper wages, overtime compensation, or rest or meal periods,
(ii) maintain and provide accurate wage-related statements and records, and (iii) reimburse certain business expenses, in each case as is required by the California Labor Code. The lawsuit seeks compensatory damages, statutory penalties
and other relief, including liquidated damages, attorneys fees, costs and injunctive relief. At this time, we are not able to predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. Therefore, we
have not accrued any liability. We believe, however, that the lawsuit is without merit and that the case should not be certified as a class or collective action, and we are vigorously defending these claims.

Additionally, in October 2011, we were named as a defendant in Acosta v. PetSmart, Inc., et. al., a lawsuit
originally filed in California Superior Court for the County of Los Angeles. The Acosta complaint raises substantially similar allegations to those raised in the Pedroza case, but the allegations in Acosta are limited to
store Operations Managers only. Like Pedroza, the Acosta lawsuit seeks compensatory damages, statutory penalties, and other relief, including liquidated damages, attorneys fees, and costs. At this time, we are not able to
predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. Therefore, we have not accrued any liability. As with Pedroza, however, we do not believe the allegations in Acosta have
merit, we do not believe that the case should be certified as a class or collective action, and we are vigorously defending these claims.

We are involved in the defense of various other legal proceedings that we do not believe are material to our consolidated financial statements.

Price Range of Common Stock. Our common stock is traded on the
NASDAQ Global Select Market under the symbol PETM. The following table indicates the intra-day quarterly high and low price per share of our common stock. These prices represent quotations among dealers without adjustments for retail markups,
markdowns or commissions, and may not represent actual transactions.

High

Low

Year Ended January 29, 2012

First Quarter ended May 1, 2011

$

43.39

$

39.29

Second Quarter ended July 31, 2011

$

46.60

$

41.61

Third Quarter ended October 30, 2011

$

48.57

$

37.76

Fourth Quarter ended January 29, 2012

$

54.96

$

45.27

Year Ended January 30, 2011

First Quarter ended May 2, 2010

$

34.89

$

25.01

Second Quarter ended August 1, 2010

$

34.93

$

29.55

Third Quarter ended October 31, 2010

$

37.74

$

28.88

Fourth Quarter ended January 30, 2011

$

41.20

$

36.55

Common Stock Dividends. We believe our ability to generate cash allows us to
invest in the growth of the business and, at the same time, distribute a quarterly dividend. Our credit facility and letter of credit facility permit us to pay dividends, as long as we are not in default and the payment of dividends would not result
in default.

In 2011 and 2010, the Board of Directors declared the following dividends:

Date Declared

DividendAmount perShare

Stockholders ofRecord
Date

Payment Date

March 23, 2011

$

0.125

April 29, 2011

May 13, 2011

June 15, 2011

$

0.14

July 29, 2011

August 12, 2011

September 21, 2011

$

0.14

October 28, 2011

November 11, 2011

December 7, 2011

$

0.14

January 27, 2012

February 10, 2012

March 23, 2010

$

0.10

April 30, 2010

May 14, 2010

June 16, 2010

$

0.125

July 30, 2010

August 13, 2010

September 29, 2010

$

0.125

October 29, 2010

November 12, 2010

December 9, 2010

$

0.125

January 28, 2011

February 11, 2011

On March 14, 2012, the Board of Directors declared a quarterly cash dividend of
$0.14 per share payable on May 11, 2012 to stockholders of record on April 27, 2012.

Holders. On March 9, 2012, there were 4,433 holders of record of our common stock.

Equity Compensation Plan Information. Information regarding our equity compensation plans will be included in
our proxy statement with respect to our Annual Meeting of Stockholders to be held on June 13, 2012 under the caption Equity Compensation Plans and is incorporated by reference in this Annual Report on Form 10-K.

Share Purchase Program. In June 2009, the Board of Directors approved a share purchase program authorizing the
purchase of up to $350.0 million of our common stock through January 29, 2012. During 2009, we purchased 5.9 million shares of our common stock for $140.0 million under the $350.0 million share purchase program. During the thirteen weeks
ended May 2, 2010, we purchased 3.4 million shares of our common stock for $107.1 million under this $350.0 million program.

In June 2010, the Board of Directors approved a share purchase program
authorizing the purchase of up to $400.0 million of our common stock through January 29, 2012, replacing the $350.0 million program. During 2010, we purchased 4.2 million shares of our common stock for $156.2 million under the $400.0
million program. During the twenty-six weeks ended July 31, 2011, we purchased 3.9 million shares of our common stock for $165.4 million under this $400.0 million program.

In June 2011, the Board of Directors approved a share purchase program authorizing the purchase of up to $450.0 million
of our common stock through January 31, 2013, replacing the $400.0 million program, effective August 1, 2011. During the twenty-six weeks ended January 29, 2012, we purchased 3.7 million shares of our common stock for $171.4
million under the $450.0 million program. As of January 29, 2012, $278.6 million remained available under the $450.0 million program.

The following table shows purchases of our common stock and the available funds to purchase additional common stock under this program for each period in the thirteen weeks ended January 29, 2012:

Period

TotalNumberof SharesPurchased

Average PricePaid per
Share

Total Number
ofSharesPurchased as Part
ofPublicly AnnouncedPlans or Programs

Stock Performance Graph. The following performance graph and related
information shall not be deemed filed with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each
as amended, except to the extent that we specifically incorporate it by reference into such filing.

The
following graph shows a five-year comparison of the cumulative total return for our common stock, the S&P 500 Index, and the S&P Specialty Stores Index based on a $100 investment on January 28, 2007 in stock or on January 31, 2007
in the index. The comparison of the total cumulative return on investment includes reinvestment of dividends. Indices are calculated on a month-end basis.

The following selected financial data is derived from our consolidated financial statements. The data below should be read
in conjunction with Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and notes thereto.

As of and for the Year Ended(1)

January 29,2012

January 30,2011

January 31,2010

February 1,2009

February 3,2008

(In thousands, except per share amounts and operating data)

Statement of Operations Data:

Net sales

$

6,113,304

$

5,693,797

$

5,336,392

$

5,065,293

$

4,672,656

Gross profit

1,804,423

1,654,531

1,519,217

1,495,433

1,436,821

Operating, general and administrative expenses

1,301,304

1,225,803

1,150,138

1,125,579

1,085,308

Operating income

503,119

428,728

369,079

369,854

351,513

Gain on sale of equity investment









95,363

Interest expense, net

(56,842

)

(58,837

)

(59,748

)

(58,757

)

(44,683

)

Income before income tax expense and equity in income from Banfield

446,277

369,891

309,331

311,097

402,193

Income tax expense

(166,960

)

(140,396

)

(117,554

)

(121,019

)

(145,180

)

Equity in income from Banfield

10,926

10,372

6,548

2,592

1,671

Net income

$

290,243

$

239,867

$

198,325

$

192,670

$

258,684

Earnings Per Common Share Data:

Basic

$

2.59

$

2.05

$

1.62

$

1.55

$

1.99

Diluted

$

2.55

$

2.01

$

1.59

$

1.52

$

1.95

Dividends declared per common share

$

0.545

$

0.475

$

0.33

$

0.12

$

0.12

Weighted average shares outstanding:

Basic

111,909

116,799

122,363

124,342

129,851

Diluted

113,993

119,405

124,701

126,751

132,954

Selected Operating Data:

Stores open at end of period

1,232

1,187

1,149

1,112

1,008

Square footage at end of period

27,247,399

26,617,162

25,876,510

25,102,528

22,825,783

Net sales per square foot(2)

$

224

$

214

$

205

$

208

$

210

Net sales growth

7.4

%

6.7

%

5.4

%

8.4

%

10.4

%

Increase in comparable store sales(3)

5.4

%

4.8

%

1.6

%

3.8

%

2.4

%

Selected Balance Sheet Data:

Merchandise inventories

$

644,864

$

615,841

$

563,389

$

584,011

$

501,212

Average inventory per store(4)

$

523

$

519

$

490

$

525

$

497

Working capital

$

582,582

$

550,124

$

501,381

$

396,677

$

214,404

Total assets

$

2,544,084

$

2,470,220

$

2,461,986

$

2,357,653

$

2,167,257

Total debt(5)

$

559,492

$

566,829

$

571,474

$

585,993

$

563,747

Total stockholders equity

$

1,153,829

$

1,170,642

$

1,172,715

$

1,144,136

$

986,597

Current ratio

1.86

1.96

1.89

1.83

1.31

Long-term debt-to-equity

44

%

45

%

46

%

48

%

52

%

Total debt-to-capital

33

%

33

%

33

%

34

%

36

%

(1)

The year ended February 3, 2008 consisted of 53 weeks while all other periods presented consisted of 52 weeks. As a result, all
comparisons for the year ended February 3, 2008, other than comparable store sales, which was calculated on an equivalent 52 week basis, also reflect the impact of one additional week. The estimated impact of this additional week resulted
in the following increases: net sales, $89.7 million; gross profit, $34.4 million; operating, general and administrative expenses, $18.3 million; income before income tax expense and equity in income from Banfield, $16.0 million;
net income, $9.8 million; and diluted earnings per common share, $0.07.

(2)

Net sales per square foot were calculated by dividing net sales, excluding catalog and e-commerce sales, by average square footage.

(3)

Sales in stores open at least one year. For the year ended February 3, 2008, includes sales through week 52.

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements that involve risks and uncertainties.
Our actual results could materially differ from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section, as well as in the sections entitled
Competition, Distribution and Government Regulation included in Item 1, Part I and Risk Factors included in Item 1, Part 1A of this Annual Report on Form 10-K.

Overview

Based on our 2011 net sales of $6.1 billion, we are North Americas leading specialty provider of products,
services and solutions for the lifetime needs of pets. As of January 29, 2012, we operated 1,232 stores, and we anticipate opening 45 to 50 net new stores in 2012. Our stores carry a broad assortment of high-quality pet supplies at everyday low
prices. We offer approximately 10,000 distinct items, including nationally recognized brand names, as well as an extensive selection of proprietary brands across a range of product categories.

We complement our extensive product assortment with a wide selection of pet services, including grooming, training,
boarding and day camp. All our stores feature pet styling salons that provide high-quality grooming services and offer comprehensive pet training services. PetsHotels provide boarding for dogs and cats, which includes 24-hour supervision by
caregivers who are PetSmart trained to provide personalized pet care, an on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, as well as day camp for dogs. As of January 29, 2012, we operated 192
PetsHotels, and we plan to open 5 net new PetsHotels in 2012.

We make full-service veterinary care available
through our strategic relationship with certain third-party operators. As of January 29, 2012, full-service veterinary hospitals were in 799 of our stores. Banfield operated 791 of the veterinary hospitals. The remaining 8 hospitals are
operated by other third parties in Canada.

The principal challenges we face as a business
are the highly competitive market in which we operate and the continuing changes in the macro-economy. However, we believe we have a competitive advantage in our solutions for the Total Lifetime CareSM of pets, including pet services and proprietary brands, which we believe cannot be easily duplicated. Additionally, we
believe that our cash flow from operations and cash on hand will be adequate to meet our operating, investing and financing needs in the foreseeable future and we continue to have access to our revolving credit facility. We expect to continuously
assess the economic environment and market conditions to guide our decisions regarding our uses of cash, including capital expenditures, investments, dividends and share repurchases.

Executive Summary



Diluted earnings per common share for 2011 increased 26.9% to $2.55 on net income of $290.2 million compared to diluted earnings per common
share of $2.01 on net income of $239.9 million in 2010.



Net sales increased 7.4% to $6.1 billion in 2011 compared to $5.7 billion in 2010 due to new store openings and an increase in comparable
store sales, or sales in stores open at least one year.



Comparable store sales increased 5.4% during 2011 compared to a 4.8% increase during 2010. The increase in sales was partially impacted by $11.2
million in favorable foreign currency fluctuations in 2011, compared to $24.6 million in favorable foreign currency fluctuations in 2010.



Services sales increased 9.1% to $674.9 million, or 11.0% of net sales, for 2011 compared to $618.8 million, or 10.9% of net sales, during
2010.



As of January 29, 2012, we had $342.9 million in cash and cash equivalents and $70.2 million in restricted cash. We had no short-term debt, and
did not borrow against the revolving credit facility during 2011.

We purchased 7.6 million shares of our common stock during each of 2011 and 2010 for $336.8 million and $263.3 million, respectively.



We added 45 net new stores during 2011 and operated 1,232 stores as of the end of the year.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of
these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our estimates for inventory valuation reserves,
asset impairments, reserve for closed stores, insurance liabilities and reserves, and income tax reserves. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results may differ from these estimates. We
believe the following critical accounting policies reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.

Inventory Valuation Reserves

We have established reserves
for estimated inventory shrinkage between physical inventories. Distribution centers perform cycle counts encompassing all inventory items at least once every quarter. Stores generally perform physical inventories at least once a year. Between the
physical inventories, stores perform counts on certain inventory items. For each reporting period presented, we estimate the inventory shrinkage based on a two-year historical trend analysis. Changes in shrink results or market conditions could
cause actual results to vary from estimates used to establish the inventory reserves.

We also have reserves
for estimated obsolescence and to reduce merchandise inventory to the lower of cost or market. We evaluate inventories for excess, obsolescence or other factors that may render inventories unmarketable at their historical cost. Factors included in
determining obsolescence reserves include current and anticipated demand, customer preferences, age of merchandise, seasonal trends and decisions to discontinue certain products. If assumptions about future demand change, or actual market conditions
are less favorable than those projected by management, we may require additional reserves.

We have not made
any significant changes in the accounting methodology we use to establish our inventory valuation reserves during the past three fiscal years. We do not presently believe there is a reasonable likelihood of a material change in the accounting
methodology and assumed factors used to create the estimates we use to calculate our inventory valuation reserves.

As of January 29, 2012, and January 30, 2011, we had inventory valuation reserves of $11.6 million and $10.0 million, respectively. Additionally, we do not believe that a 10% change in our
inventory valuation reserves would be material to our consolidated financial statements.

Asset Impairments

We review long-lived assets for impairment on a quarterly basis and whenever events or changes in circumstances indicate
that the book value of such assets may not be recoverable.

We have not made any significant changes in our
impairment loss assessment methodology during the past three fiscal years. We do not presently believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset
impairment losses. No material asset impairments were identified during 2011, 2010 or 2009.

Reserve for Closed Stores

We continuously evaluate the performance of our stores and periodically close those that are under-performing. Closed
stores are generally replaced by a new store in a nearby location. We establish reserves for future occupancy payments on closed stores in the period the store is closed. These costs are classified in operating, general and administrative expenses
in the Consolidated Statements of Income and Comprehensive Income. As of January 29, 2012, and January 30, 2011, our reserve for closed stores was $10.0 million and $9.8 million, respectively. We do not believe there is a
reasonable likelihood of a material change in the future estimates or assumptions that we use to determine our reserve for closed stores, including cash flow projections and sublease assumptions. We do not believe that a 10% change in our reserve
for closed stores would be material to our consolidated financial statements.

We maintain workers compensation, general liability, product liability and property and casualty insurance. We
utilize high deductible plans for each of these areas as well as a self-insured health plan for our eligible associates. Workers compensation deductibles generally carry a $1.0 million per occurrence risk of claim liability. Our general
liability plan specifies a $0.5 million per occurrence risk of claim liability. We establish reserves for claims under workers compensation and general liability plans based on periodic actuarial estimates of the amount of loss for all
pending claims, including estimates for which claims have been incurred but not reported. Our loss estimates rely on actuarial observations of ultimate loss experience for similar historical events and changes in such assumptions could result in an
adjustment, favorable or adverse, to our reserves. As of January 29, 2012, and January 30, 2011, we had approximately $102.8 million and $99.9 million, respectively, in reserves related to workers compensation, general
liability and self-insured health plans.

We have not made any material changes in the accounting methodology
we use to establish our insurance reserves during the past three years. We do not believe there is a reasonable likelihood of a material change in the estimates or assumptions that we use to calculate our insurance reserves, including factors such
as historical claims experience, demographic factors, severity factors and other valuations. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material. A 10% change
in our insurance reserves would have affected net income by approximately $6.4 million in 2011.

Income Tax Reserves

We establish deferred income tax assets and liabilities for temporary differences between the financial reporting bases
and the income tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. We record a valuation allowance on the deferred income tax assets to reduce the total to an
amount we believe is more likely than not to be realized. Valuation allowances at January 29, 2012, and January 30, 2011, were principally to offset certain deferred income tax assets for net operating loss carryforwards.

We operate in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can
involve complex issues that may require an extended period of time to resolve and may cover multiple years. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our
effective income tax rate in a given fiscal period could be materially affected. An unfavorable tax settlement would require use of our cash and could result in an increase in our effective income tax rate in the period of resolution. A favorable
tax settlement could result in a reduction in our effective income tax rate in the period of resolution.

Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we
may be exposed to losses or gains that could be material.

Recently Issued Accounting Pronouncements

See Note 2, Recently Issued Accounting Pronouncements, in the Notes to the Consolidated Financial Statements
included in this Annual Report on Form 10-K for a description of recently issued and adopted accounting pronouncements, including the impact to our consolidated financial statements.

Results of Operations

The following table presents the
percent to net sales of certain items included in our Consolidated Statements of Income and Comprehensive Income:

Net sales increased $0.4 billion, or
7.4%, to $6.1 billion in 2011, compared to net sales of $5.7 billion in 2010. The increase in net sales was partially impacted by $11.2 million in favorable foreign currency fluctuations during 2011. Approximately 75% of the sales increase is due to
a 5.4% increase in comparable store sales for 2011, and 25% of the sales increase is due to the addition of 45 net new stores and 12 new PetsHotels since January 30, 2011.

Comparable store sales growth was driven by an increase in comparable transactions and average sales per comparable
transaction due to the impact of merchandising strategies, pricing strategies and new product offerings. The impact of comparable transactions and average sales per comparable transaction is summarized below.

Year Ended

January 29,2012

January 30,2011

Comparable transactions

2.5

%

2.1

%

Average sales per comparable transaction

2.9

2.7

Services sales, which include grooming, training, boarding and day camp, increased 9.1%,
or $56.1 million, to $674.9 million for 2011, compared to $618.8 million for 2010. Services sales represented 11.0% and 10.9% of net sales for 2011 and 2010, respectively. The increase in services sales is primarily due to continued strong demand
for our grooming services, and the addition of 45 net new stores and 12 new PetsHotels since January 30, 2011.

Other revenue included in net sales during 2011, represents license fees and reimbursements for utilities and specific operating expenses charged to Banfield under the master operating agreement which
comprised 0.6% of net sales, or $36.7 million, in 2011, compared to 0.6% of net sales, or $34.2 million, during 2010.

Overall merchandise margin increased 5 basis points due to a 20 basis point improvement in rate, which was offset by a 15 basis point decline in mix. The rate improvement is the result of increased sales
of higher margin goods within the product categories and improvement in shrink during 2011, relative to 2010. Mix was negatively impacted as the sales growth in our consumables continued to outpace the sales growth of our higher margin hardgoods
category. Hardgoods merchandise includes pet supplies such as collars, leashes, health care supplies, grooming and beauty aids, toys and apparel, as well as pet beds and carriers. Consumables merchandise sales, which include pet food, treats, and
litter, generate lower gross margins on average compared to hardgoods merchandise.

Services margin increased
5 basis points primarily due to increased sales as well as a shift to higher margin offerings in our grooming services. Services sales typically generate lower gross margins than merchandise sales as service-related labor is included in cost of
sales; however, services generate higher operating margins than merchandise sales.

Store occupancy costs
included in margin provided 30 basis points due to leverage associated with the increase in net sales.

Operating,
General and Administrative Expenses

Operating, general and administrative expenses decreased 20 basis
points to 21.3% of net sales for 2011, from 21.5% of net sales for 2010. Operating, general and administrative expenses increased on a dollar basis by $75.5 million. The primary reasons for the year over year increase include store growth, planned
incremental advertising spend focused on our differentiated offerings and higher incentive compensation.

Interest expense, which is primarily related to capital lease obligations, decreased to $58.1 million for 2011, compared
to $59.6 million for 2010 due to a decrease in capital lease obligations. Included in interest expense, net was interest income of $1.3 million and $0.8 million for 2011 and 2010, respectively.

Income Tax Expense

For 2011, the $167.0 million income tax expense represents an effective tax rate of 37.4% compared with 2010, when we had income tax expense of $140.4 million, which represented an effective tax rate of
38.0%. The decrease in the effective tax rate was primarily due to a tax deductible dividend received from Banfield, partially offset by an increase in certain state tax liabilities. The effective tax rate is calculated by dividing our income tax
expense, which includes the income tax expense related to our equity in income from Banfield, by income before income tax expense and equity in income from Banfield.

Equity in Income from Banfield

Our equity in income
from our investment in Banfield was $10.9 million and $10.4 million for 2011 and 2010, respectively, based on our ownership percentage in Banfield.

2010 compared to 2009

Net Sales

Net sales increased $0.4 billion, or 6.7%, to $5.7 billion in 2010, compared to net sales of $5.3 billion in 2009. The
increase in net sales was partially impacted by $24.6 million in favorable foreign currency fluctuations during 2010. Approximately 20% of the sales increase is due to the addition of 38 net new stores and 18 new PetsHotels since January 31,
2010, and 70% of the increase is due to a 4.8% increase in comparable store sales for 2010, and the remaining 10% of the sales increase is due to other revenue from reimbursements charged to Banfield.

Comparable store sales growth was driven by an increase in comparable transactions and average sales per comparable
transaction due to the impact of merchandising strategies, pricing strategies and new product offerings. The impact of comparable transactions and average sales per comparable transaction is summarized below.

Year Ended

January 30,2011

January 31,2010

Comparable transactions

2.1

%

(0.3

)%

Average sales per comparable transaction

2.7

1.9

Services sales, which include grooming, training, boarding and day camp, increased 7.5%,
or $43.4 million, to $618.8 million for 2010, compared to $575.4 million for 2009. Services sales represented 10.9% and 10.8% of net sales for 2010 and 2009, respectively. The increase in services sales is primarily due to continued strong demand
for our grooming services, and the addition of 38 net new stores and 18 new PetsHotels since 2009.

Overall merchandise margin increased 30 basis points due to the sales of a higher margin mix of products
within the product categories. Our hardgoods sales outpaced the sales growth of our consumables category during 2010, primarily due to the addition of the flea and tick product line. The flea and tick margin, net of shrink, was slightly higher than
our average consumables margin, but significantly less than our average merchandise margin. Hardgoods merchandise includes pet supplies such as collars, leashes, health care supplies, grooming and beauty aids, toys and apparel, as well as pet beds
and carriers. Consumables merchandise sales, which include pet food, treats, and litter, generate lower gross margins on average compared to hardgoods merchandise.

Services negatively contributed to gross margin by 10 basis points. Services
sales typically generate lower gross margins than merchandise sales as service-related labor is included in cost of sales; however, services generate higher operating margins than merchandise sales. Store occupancy costs included in gross margin
provided 40 basis points of improvement due to leverage associated with the increase in net sales, favorable lease negotiations and lower utility costs. Warehouse and distribution costs included in gross margin provided a benefit of 15 basis points
due to leverage associated with the increase in net sales.

Recognizing reimbursements from Banfield as other
revenue negatively impacted gross margin by 15 basis points. In accordance with our master operating agreement with Banfield, we charge Banfield license fees for the space used by the veterinary hospitals and for their portion of utilities
costs. We also charge Banfield for its portion of specific operating expenses. Prior to February 1, 2010, license fees were treated as a reduction of occupancy costs, which are included as a component of cost of merchandise sales, and
reimbursements for specific operating expenses were treated as a reduction of operating, general and administrative expense in the Consolidated Statement of Operations and Comprehensive Income. Beginning February 1, 2010, license fees and
the reimbursements for specific operating expenses are included in other revenue, and the related costs are included in cost of other revenue in the Consolidated Statements of Income and Other Comprehensive Income.

Operating, General and Administrative Expenses

Operating, general and administrative expenses decreased to 21.5% of net sales for 2010 from 21.6% of net sales for 2009.
Operating, general and administrative expenses increased on a dollar basis by $75.7 million. The primary reasons for the year over year increase include increases in costs for incentive compensation associated with better than expected financial
results, increased advertising costs, higher bank fees associated with increases in debit card rates and higher claims expense for health insurance.

Interest Expense, net

Interest expense, which is
primarily related to capital lease obligations, decreased to $59.6 million for 2010, compared to $60.3 million for 2009. Included in interest expense, net was interest income of $0.8 million and $0.6 million for 2010 and 2009, respectively.

Income Tax Expense

For 2010, income tax expense was $140.4 million, compared with 2009 income tax expense of $117.6 million. The effective tax rate was 38.0% for both years. The effective tax rate is calculated by dividing
our income tax expense, which includes the income tax expense related to our equity in income from Banfield, by income before income tax expense and equity in income from Banfield.

Equity in Income from Banfield

Our equity in income from our investment in Banfield was $10.4 million and $6.5 million for 2010 and 2009, respectively, based on our ownership percentage in Banfield.

Liquidity and Capital Resources

Cash Flow

We believe that our operating cash flow
and cash on hand will be adequate to meet our operating, investing and financing needs in the foreseeable future. In addition, we also have access to our $100.0 million revolving credit facility, although there can be no assurance of our ability to
access these markets on commercially acceptable terms in the future. We expect to continuously assess the economic environment and market conditions to guide our decisions regarding our uses of cash, including capital expenditures, investments,
dividends and the purchase of treasury stock.

We finance our operations, new store and PetsHotel growth,
store remodels and other expenditures to support our growth initiatives primarily through cash generated by operating activities. Receipts from our sales come from cash, checks and third-party debit and credit cards, and therefore provide a
significant source of liquidity. Cash is used in operating activities primarily to fund procurement of merchandise inventories and other assets, net of accounts payable and other accrued liabilities. Net cash provided by operating activities was
$575.4 million for 2011, $457.6 million for 2010, and $566.9 million for 2009. The primary differences between 2011 and 2010 include increased net income of $50.4 million, an increase in non-trade accounts payable resulting from the

extension of vendor terms of $29.6 million, a reduction in growth of merchandise inventories of $21.8 million and the $16.0 million dividend received from Banfield in 2011, as no dividends were
received in 2010. The primary differences between 2010 and 2009 were increased purchases of merchandise inventories of $74.5 million and income tax payments of $35.9 million. Income tax payments were greater in 2010 as a result of increased earnings
and due to the benefit provided in 2009 by our prepaid tax position at the end of 2008.

Net cash used in
investing activities consisted primarily of expenditures associated with opening new stores, reformatting existing stores, expenditures associated with equipment and computer software in support of our system initiatives, PetsHotel construction
costs, and other expenditures to support our growth plans and initiatives. Net cash used in investing activities was $155.4 million for 2011, $147.9 million in 2010 and $157.2 million in 2009. The primary difference between 2011 and 2010 was
purchases of investments. The primary differences between 2010 and 2009 resulted from an increase in restricted cash during 2009, an increase in cash paid for property and equipment in 2010 and our investment in short-term available for sale
securities during 2010.

Net cash used in financing activities was $369.4 million for 2011, $328.1 million for
2010 and $229.4 million for 2009. Cash used in 2011 consisted primarily of cash paid for treasury stock, payments of cash dividends, payments on capital lease obligations, offset by net proceeds from common stock issued under equity incentive plans
and an increase in our bank overdraft. The primary differences between 2011 and 2010 were an increase in cash paid for treasury stock and an increase in our bank overdraft. The primary difference between 2010 and 2009 was an increase in cash paid
for treasury stock.

Free Cash Flow

Free cash flow is considered a non-GAAP financial measure under the SECs rules. Management believes that free cash
flow is an important financial measure for use in evaluating our financial performance and our ability to generate future cash from our business operations. Free cash flow should be considered in addition to, rather than as a substitute for, net
income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.

Although other companies report free cash flow, numerous methods exist for calculating free cash flow. As a result, the method used by our management to calculate free cash flow may differ from the
methods other companies use to calculate free cash flow. We urge you to understand the methods used by another company to calculate free cash flow before comparing our free cash flow to that of another company. We define free cash flow as net cash
provided by operating activities minus cash paid for property and equipment, and payments of capital lease obligations.

For 2011, our free cash flow increased primarily due to an increase in net income, an
increase in non-trade accounts payable resulting from the extension of vendor terms, a reduction in growth of merchandise inventory, receipt of a dividend from Banfield, and a decrease in capital spending during 2011. For 2010, our free cash flow
decreased primarily due to increases in merchandise inventory balances, income tax payments, capital spending and capital lease payments during 2010.

Share Purchase Program

In June 2009, the Board of
Directors approved a share purchase program authorizing the purchase of up to $350.0 million of our common stock through January 29, 2012. During 2009, we purchased 5.9 million shares of our common stock for $140.0 million under the $350.0
million share purchase program. During the thirteen weeks ended May 2, 2010, we purchased 3.4 million shares of our common stock for $107.1 million under this $350.0 million program.

In June 2010, the Board of Directors approved a share purchase program
authorizing the purchase of up to $400.0 million of our common stock through January 29, 2012, replacing the $350.0 million program. During 2010, we purchased 4.2 million shares of our common stock for $156.2 million under the $400.0
million program. During the twenty-six weeks ended July 31, 2011, we purchased 3.9 million shares of our common stock for $165.4 million under this $400.0 million program.

In June 2011, the Board of Directors approved a share purchase program authorizing the purchase of up to $450.0 million
of our common stock through January 31, 2013, replacing the $400.0 million program, effective August 1, 2011. During the twenty-six weeks ended January 29, 2012, we purchased 3.7 million shares of our common stock for $171.4
million under the $450.0 million program. As of January 29, 2012, $278.6 million remained available under the $450.0 million program.

Common Stock Dividends

We believe our ability to
generate cash allows us to invest in the growth of the business and, at the same time, distribute a quarterly dividend. Our revolving credit facility and letter of credit facility permit us to pay dividends, as long as we are not in default and the
payment of dividends would not result in default. During 2011, 2010, and 2009, we paid aggregate dividends of $0.53 per share, $0.45 per share, and $0.26 per share, respectively.

Operating Capital and Capital Expenditure Requirements

Substantially all our stores are leased facilities. We opened 53 new stores and closed 8 stores in 2011. Generally, each
new store requires capital expenditures of approximately $0.8 million for fixtures, equipment and leasehold improvements, approximately $0.3 million for inventory and approximately $0.1 million for preopening costs. We expect total capital spending
to be $130 million to $140 million for 2012, based on our plan to open approximately 45 to 50 net new stores and 5 new PetsHotels, continuing our investment in the development of our information systems, adding to our services capacity with the
expansion of certain grooming salons, remodeling or replacing certain store assets and continuing our store refresh program.

Our ability to fund our operations and make planned capital expenditures depends on our future operating performance and cash flow, which are subject to prevailing economic conditions and to financial,
business and other factors, some of which are beyond our control.

The following table presents our capital
expenditures for each of the past three years (in thousands):

The following table summarizes our contractual obligations, net of
estimated sublease income, at January 29, 2012, and the effect that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

In addition to the commitments scheduled above, we have executed operating and capital lease agreements with total minimum lease payments of
$104.1 million. The typical lease term for these agreements is 10 years. We do not have the right to control the use of the property under these leases as of January 29, 2012 because we have not taken physical possession of the property.

Approximately $20.9 million of unrecognized tax benefits, as shown in Other, have been recorded as liabilities, and we are
uncertain as to if or when such amounts may be settled.

(5)

Approximately $71.1 million of insurance obligations, as shown in Other have been classified as noncurrent liabilities. We are unable to
estimate the specific year to which the obligations will relate beyond 2012.

Letters of Credit

We issue letters of credit for guarantees provided for insurance programs. As of January 29, 2012,
$94.6 million was outstanding under our letters of credit.

Off-Balance Sheet Arrangements

Other than in connection with executing operating leases, we do not have any off-balance sheet financing that has, or is
reasonably likely to have, a material current or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures or capital resources.

Related Party Transactions

We have an investment in Banfield, who through a wholly owned subsidiary, Medical Management International, Inc., operates full-service veterinary hospitals in 791 of our stores. We use the equity method
of accounting for our investment in Banfield, which consists of common and convertible preferred stock. Two members of our management team are members of the Banfield Board of Directors. As of January 29, 2012, and January 30, 2011, we
owned 21.4% of the voting stock and 21.0% of the combined voting and non-voting stock of Banfield. Our equity in income from our investment in Banfield, which is recorded one month in arrears, was $10.9 million, $10.4 million and $6.5 million for
2011, 2010, and 2009, respectively.

In accordance with our master operating agreement with Banfield, we
charge Banfield license fees for the space used by the veterinary hospitals and for their portion of utilities costs. We also charge Banfield for its portion of specific operating expenses. Prior to February 1, 2010, license fees were
treated as a reduction of occupancy costs, which are included as a component of cost of merchandise sales, and reimbursements for specific operating expenses were treated as a reduction of operating, general and administrative expense in the
Consolidated Statement of Income and Comprehensive Income. Beginning February 1, 2010, license fees and the reimbursements for specific operating expenses are included in other revenue, and the related costs are included in cost of other
revenue in the Consolidated Statements of Income and Comprehensive Income.

We recognized license fees and
reimbursements for specific operating expenses from Banfield of $36.7 million, $34.2 million and $33.2 million during 2011, 2010 and 2009, respectively. Receivables from Banfield totaled $3.1 million and $2.7 million at
January 29, 2012, and January 30, 2011, respectively, and were included in receivables, net in the Consolidated Balance Sheets.

The master operating agreement also includes a provision for the sharing of
profits on the sales of therapeutic pet foods sold in all stores with a hospital operated by Banfield. The net sales and gross profits on the sale of therapeutic pet foods are not material to our consolidated financial statements.

Credit Facilities

Effective April 22, 2011, we elected to reduce the aggregate commitment amount under our $350.0 million revolving credit facility, or Revolving Credit Facility, to $100.0 million, which
allows us to avoid stand-by costs related to the excess commitment amount. This Revolving Credit Facility expires on August 15, 2012. Borrowings under the Revolving Credit Facility are subject to a borrowing base and bear interest, at our
option, at a banks prime rate plus 0% to 0.25% or LIBOR plus 0.875% to 1.25%. We are subject to fees payable to lenders each quarter at an annual rate of 0.20% of the unused amount of the Revolving Credit Facility. The Revolving Credit
Facility also gives us the ability to issue letters of credit, which reduce the amount available under the Revolving Credit Facility. Letter of credit issuances under the Revolving Credit Facility are subject to interest payable to the lenders and
bear interest of 0.875% to 1.25% for standby letters of credit or 0.438% to 0.625% for commercial letters of credit.

As of January 29, 2012, we had no borrowings and $24.4 million in stand-by letter of credit issuances under our Revolving Credit Facility. As of January 30, 2011, we had no borrowings and
$31.6 million in stand-by letter of credit issuances under our Revolving Credit Facility.

We also have a
$100.0 million stand-alone letter of credit facility, or Stand-alone Letter of Credit Facility, that expires on August 15, 2012. We are subject to fees payable to the lender each quarter at an annual rate of 0.45% of the average
daily face amount of the letters of credit outstanding during the preceding calendar quarter. In addition, we are required to maintain a cash deposit with the lender equal to the amount of outstanding letters of credit or we may use other approved
investments as collateral. If we use other approved investments as collateral, we must have an amount on deposit which, when multiplied by the advance rate of 85%, is equal to the amount of the outstanding letters of credit under the Stand-alone
Letter of Credit Facility.

As of January 29, 2012, we had $70.2 million in outstanding letters of credit
under the Stand-alone Letter of Credit Facility and $70.2 million in restricted cash on deposit with the lender. As of January 30, 2011, we had $61.4 million in outstanding letters of credit under the Stand-alone Letter of Credit Facility and
$61.4 million in restricted cash on deposit with the lender.

We issue letters of credit for guarantees
provided for insurance programs.

Our Revolving Credit Facility and Stand-alone Letter of Credit Facility
permit the payment of dividends if we are not in default and the payment of dividends would not result in default of the Revolving Credit Facility and Stand-alone Letter of Credit Facility. As of January 29, 2012, we were in compliance with the
terms and covenants of our Revolving Credit Facility and Stand-alone Letter of Credit Facility. The Revolving Credit Facility and Stand-alone Letter of Credit Facility are secured by substantially all our personal property assets, our wholly owned
subsidiaries and certain real property.

We intend to refinance our Revolving Credit Facility and the
Stand-alone Letter of Credit Facility with similar facilities and terms before they expire on August 15, 2012.

Seasonality and Inflation

Our business is subject to seasonal fluctuations. We typically realize a higher portion of our net sales and operating profits during the fourth quarter due to increased holiday traffic. As a result of
this seasonality, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Controllable expenses could fluctuate from
quarter-to-quarter in a year. Since our stores typically draw customers from a large trade area, sales also may be impacted by adverse weather or travel conditions, which are more prevalent during certain seasons of the year. As a result of our
expansion plans, the timing of new store and PetsHotel openings and related preopening costs, the amount of revenue contributed by new and existing stores and PetsHotels and the timing and estimated obligations of store closures, our quarterly
results of operations may fluctuate. Finally, because new stores tend to experience higher payroll, advertising and other store level expenses as a percentage of sales than mature stores, new store openings will also contribute to lower store
operating margins until these stores become established. We expense preopening costs associated with each new location as the costs are incurred.

While we have experienced inflationary pressure in recent years, we have
been able to largely mitigate the effect by increasing retail prices accordingly. Although neither inflation nor deflation has had a material impact on net operating results, we can make no assurance that our business will not be affected by
inflation or deflation in the future.

Impact of Federal Health Care Reform Legislation

In March 2010, the President of the United States signed into law the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act of 2010, or the Acts. The provisions of the Acts are not expected to have a significant impact to our consolidated financial statements in the short
term. The longer term potential impacts of the Acts to our business and the consolidated financial statements are currently uncertain. We will continue to assess the impact of the Acts on our health care plans.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are subject to certain market risks arising from transactions in the normal course of our business. Such risk is
principally associated with foreign exchange fluctuations.

Foreign Currency Risk

Our Canadian subsidiary operates 73 stores and uses the Canadian dollar as the functional currency and the United States
dollar as the reporting currency. We have certain exposures to foreign currency risk. Net sales in Canada, denominated in United States dollars, were $0.3 billion, or 5.4% of our consolidated net sales for 2011. Transaction gains and losses
denominated in the United States dollar are recorded in cost of sales or operating, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income depending on the nature of the underlying transaction.

The transaction loss (gain) included in net income was $0.8 million, $(0.7) million and $(1.3) million for
2011, 2010 and 2009, respectively.

From time to time, we have entered into foreign currency exchange forward
contracts, or Foreign Exchange Contracts, in Canada to manage the impact of foreign currency exchange rate fluctuations related to certain balance sheet accounts. We do not designate these Foreign Exchange Contracts as hedges and,
accordingly, they are recorded at fair value using quoted prices for similar assets or liabilities in active markets. The changes in the fair value are recognized in operating, general and administrative expenses in the Consolidated Statements of
Income and Comprehensive Income. We recorded (gains) losses of $(0.1) million and $0.4 million for 2011 and 2010, respectively. We did not enter into Foreign Exchange Contracts during 2009.

Item 8. Financial Statements and Supplementary Data

The information required by this Item is attached as Appendix F.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

We maintain disclosure controls and
procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within
the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as
appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b)
under the Exchange Act, our management conducted an evaluation (under the supervision and with the participation of our CEO and our CFO) as of the end of the period covered by this report, of the effectiveness of our disclosure controls and
procedures as defined in Rule 13a-15(e) under the Exchange Act. In performing this evaluation, our CEO and CFO concluded that, as of January 29, 2012, our disclosure controls and procedures were designed to meet the objective at the
reasonable assurance level and were effective at the reasonable assurance level.

We are responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual
Report on Form 10-K. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and, accordingly, include certain amounts based on our best judgments and
estimates. Financial information in this Annual Report on Form 10-K is consistent with that in the consolidated financial statements.

We are responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) under the Exchange Act. Our internal controls over
financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal control over financial reporting is supported by a program
of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel and a written Code of Business Conduct adopted by our Board of Directors, applicable to all our
Directors, officers, employees and subsidiaries. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance
with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal
control over financial reporting as of January 29, 2012. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control  Integrated
Framework. Based on our assessment, we maintained effective internal control over financial reporting as of January 29, 2012.

The effectiveness of our internal control over financial reporting as of January 29, 2012, has been audited by Deloitte & Touche, LLP, an independent registered accounting firm, as stated in
their attestation report, which is included herein.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange
Act during the thirteen weeks ended January 29, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have audited the internal control over financial reporting of PetSmart, Inc. and subsidiaries (the
Company) as of January 29, 2012, based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting
is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets
that could have a material effect on the financial statements.

Because of the inherent limitations of
internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of January 29, 2012, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedule as of and for the year ended January 29, 2012 of the Company and our reports dated March 23, 2012 expressed unqualified opinions on those financial
statements and the financial statement schedule.

The required information concerning our executive officers is contained in Item 1, Part I of this
Annual Report on Form 10-K.

The remaining information required by this item is incorporated by reference
from the information under the captions Corporate Governance and the Board of Directors, Audit Committee, Report of the Audit Committee of the Board of Directors, and Section 16(a) Beneficial Ownership
Reporting Compliance in our proxy statement for our Annual Meeting of Stockholders to be held on June 13, 2012.

Our associates must act ethically at all times and in accordance with the policies in PetSmarts Code of Business Ethics and Policies. We require full compliance with this policy and all designated
associates including our CEO, CFO and other individuals performing similar positions, to sign a certificate acknowledging that they have read, understand and will continue to comply with the policy. We publish the policy and any amendments or
waivers to the policy in the Corporate Governance section of our Internet Website located at www.petm.com.

Item 11. Executive Compensation

The information required by this item is incorporated by reference from the information under the captions
Compensation Discussion and Analysis, Executive Compensation, Stock Award Grants, Exercises and Plans, Employment and Severance Agreements, Director Compensation,
Compensation Committee Interlocks and Insider Participation, and Report of the Compensation Committee of the Board of Directors in our proxy statement.

The information required by this item is incorporated by reference from the information under the captions Security
Ownership of Certain Beneficial Owners and Management and Equity Compensation Plans in our proxy statement.

The information required by this item is incorporated by reference from the information under the captions Certain Relationships and Transactions and Corporate Governance and the Board
of Directors Independence in our proxy statement.

Item 14. Principal Accounting Fees
and Services

The information required by this item is incorporated by reference from the information
under caption Fees to Independent Registered Public Accounting Firm for Fiscal Years 2012 and 2011 in our proxy statement.

PART IV

Item 15. Exhibits, Financial Statement Schedule

(a) The following documents are filed as part of this Annual Report on Form 10-K.

1. Consolidated Financial Statements: Our consolidated financial statements are included as
Appendix F of this Annual Report. See Index to Consolidated Financial Statements and Financial Statement Schedule on page F-1.

2. Consolidated Financial Statement Schedule: The financial statement schedule required under the related instructions is included within Appendix F of this Annual Report. See Index
to Consolidated Financial Statements and Financial Statement Schedule on page F-1.

3. Exhibits: The exhibits which are filed with this Annual Report or which are incorporated herein by
reference are set forth in the Exhibit Index on page E-1.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 23, 2012.

PetSmart, Inc.

By:

/s/ ROBERT F. MORAN

Robert F. Moran

Chairman and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert F.
Moran and Lawrence P. Molloy, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to
sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

We have audited the accompanying consolidated balance sheets of PetSmart, Inc. and subsidiaries (the Company)
as of January 29, 2012 and January 30, 2011, and the related consolidated statements of income and comprehensive income, stockholders equity, and cash flows for each of the three years in the period ended January 29,
2012. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated
financial statements present fairly, in all material respects, the financial position of PetSmart, Inc. and subsidiaries as of January 29, 2012 and January 30, 2011, and the results of their operations and their cash flows for each of the
three years in the period ended January 29, 2012, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Companys internal control over financial reporting as of January 29, 2012, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March 23, 2012 expressed an unqualified opinion on the Companys internal control over financial reporting.

PetSmart, Inc., including its wholly owned subsidiaries (the Company, PetSmart or we), is the leading specialty provider of products, services and solutions for the
lifetime needs of pets in the United States, Puerto Rico and Canada. We offer a broad selection of products for all the life stages of pets, as well as various pet services including professional grooming, training, boarding and day camp. We also
offer pet products through an e-commerce site. As of January 29, 2012, we operated 1,232 retail stores and had full-service veterinary hospitals in 799 of our stores. MMI Holdings, Inc., through a wholly owned subsidiary, Medical Management
International, Inc., collectively referred to as Banfield, operated 791 of the veterinary hospitals under the registered trade name of Banfield, The Pet Hospital. The remaining 8 hospitals are operated by other third parties
in Canada.

Principles of Consolidation

Our consolidated financial statements include the accounts of PetSmart and our wholly owned subsidiaries. We have
eliminated all intercompany accounts and transactions.

Fiscal Year

Our fiscal year consists of 52 or 53 weeks and ends on the Sunday nearest January 31. The 2011 fiscal year ended on
January 29, 2012, and was a 52-week year. The 2010 and 2009 fiscal years were also 52-week years. Unless otherwise specified, all references to years in these consolidated financial statements are to fiscal years.

Reclassifications

For the year ended January 29, 2012, we have presented compensation cost for restricted stock, performance shares,
and stock options included in additional paid-in capital in a single line called stock-based compensation expense on the Consolidated Statements of Stockholders Equity. We have also presented the issuance of common stock under stock incentive
plans for restricted stock, performance shares, and stock options included in common stock and additional paid-in capital in a single line called issuance of common stock under stock incentive plans on the Consolidated Statements of
Stockholders Equity. Amounts related to the years ended January 30, 2011, and January 31, 2010, have been reclassified to conform to the current year presentation. There were no changes to total common stock or additional paid-in
capital as a result of these reclassifications.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results could differ from these estimates.

Segment Reporting

Operating segments are components of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Utilizing these criteria, we manage our business on the basis of one reportable operating segment.

Net sales in the United States and Puerto Rico were $5.8 billion, $5.4 billion and $5.1 billion for 2011, 2010 and 2009,
respectively. Net sales in Canada, denominated in United States dollars, were $0.3 billion, $0.3 billion and $0.2 billion for 2011, 2010 and 2009, respectively. Substantially all our long-lived assets are located in the United States.

Our financial instruments consist primarily of cash and cash equivalents, restricted cash, receivables and accounts
payable. These balances, as presented in the consolidated financial statements at January 29, 2012, and January 30, 2011, approximate fair value because of the short-term nature. We have short-term investments in municipal bonds, which are
recorded at fair value using quoted prices in active markets for identical assets or liabilities as detailed in Note 5. We also have investments in negotiable certificates of deposit, which are carried at their amortized cost basis as detailed in
Note 5. From time to time, we have entered into foreign exchange currency contracts, which are not designated as hedges and are recorded at fair value using quoted prices for similar assets or liabilities in active markets, as detailed in Note 3.

Cash and Cash Equivalents

We consider any liquid investments with a maturity of three months or less at purchase to be cash equivalents. Included in
cash and cash equivalents are credit and debit card receivables from banks, which typically settle within five business days, of $52.3 million and $48.9 million as of January 29, 2012, and January 30, 2011, respectively.

Under our cash management system, a bank overdraft balance exists for our primary disbursement accounts. This
overdraft represents uncleared checks in excess of cash balances in the related bank accounts. Our funds are transferred on an as-needed basis to pay for clearing checks. As of January 29, 2012, and January 30, 2011, bank overdrafts of
$53.8 million and $32.5 million, respectively, were included in accounts payable and bank overdraft in the Consolidated Balance Sheets.

Restricted Cash

We are required to maintain a cash deposit with the lenders of our stand-alone letter of credit facility equal to the
amount of the outstanding letters of credit, or we may use other approved investments as collateral. If we use other approved investments as collateral, we must have an amount on deposit which, when multiplied by the advance rate of 85%, is equal to
the amount of the outstanding letters of credit under the stand-alone letter of credit facility.

Vendor Rebates and Cooperative Advertising Incentives

We receive vendor allowances, in the form of purchase rebates and cooperative advertising incentives,
from agreements made with certain merchandise suppliers. Rebate incentives are initially deferred as a reduction of the cost of inventory purchased and then recognized as a reduction of cost of sales as the related inventory is sold. Cooperative
advertising incentives are recorded as a reduction of operating, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income. Unearned purchase rebates recorded as a reduction of inventory, and rebate and
cooperative advertising incentives remaining in receivables in the Consolidated Balance Sheets were not material as of January 29, 2012, and January 30, 2011.

Merchandise Inventories and Valuation Reserves

Merchandise inventories represent finished goods and are recorded at the lower of cost or market. Cost is determined by
the moving average cost method and includes inbound freight, as well as certain procurement and distribution costs related to the processing of merchandise.

We have established reserves for estimated inventory shrinkage between physical inventories. Physical inventory counts are taken on a regular basis, and inventory is adjusted accordingly. For each
reporting period presented, we estimate the inventory shrinkage based on a two-year historical trend analysis. Changes in shrink results or market conditions could cause actual results to vary from estimates used to establish the reserves.

We have reserves for estimated obsolescence and to reduce inventory to the lower of cost or market. We
evaluate inventory for excess, obsolescence or other factors that may render inventories unmarketable at their historical cost. If assumptions about future demand change or actual market conditions are less favorable than those projected by
management, we may require additional reserves.

As of January 29, 2012, and January 30, 2011, our
inventory valuation reserves were $11.6 million and $10.0 million, respectively.

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is provided on
buildings, furniture, fixtures and equipment and computer software using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements and capital lease assets are amortized using the straight-line method
over the shorter of the lease term or the estimated useful lives of the related assets. Computer software consists primarily of third-party software purchased for internal use. Costs associated with the preliminary stage of a project are expensed as
incurred. Once the project is in the development phase, external consulting costs, as well as qualifying internal labor costs, are capitalized. Training costs, data conversion costs and maintenance costs are expensed as incurred. Maintenance and
repairs to furniture, fixtures and equipment are expensed as incurred.

Long-lived assets are reviewed for
impairment based on undiscounted cash flows. We conduct this review quarterly and whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If this review indicates that the carrying amount
of the long-lived assets is not recoverable, we will recognize an impairment loss, measured at fair value by estimated discounted cash flows or market appraisals. No material asset impairments were identified during 2011, 2010 or 2009.

Our property and equipment are depreciated using the following estimated useful lives:

Buildings

39 years or term of lease

Furniture, fixtures and equipment

2 - 12 years

Leasehold improvements

1 - 20 years

Computer software

3 - 7 years

Goodwill

The carrying value of goodwill of $44.1 million as of January 29, 2012, and January 30, 2011, represents
the excess of the cost of acquired businesses over the fair market value of their net assets. Other than the effects of foreign currency translation, no other changes were made to goodwill during 2011, 2010 or 2009.

Insurance Liabilities and Reserves

We maintain workers compensation, general liability, product liability and property insurance, on all our
operations, properties and leasehold interests. We utilize high deductible plans for each of these areas including a self-insured health plan for our eligible associates. Workers compensation deductibles generally carry a $1.0 million per
occurrence risk of claim liability. Our general liability plan specifies a $0.5 million per occurrence risk of claim liability. We establish reserves for claims under workers compensation and general liability plans based on periodic actuarial
estimates of the amount of loss for all pending claims, including estimates for which claims have been incurred but not reported. Our loss estimates rely on actuarial observations of ultimate loss experience for similar historical events and changes
in such assumptions could result in an adjustment, favorable or adverse, to our reserves. As of January 29, 2012, and January 30, 2011, we had approximately $102.8 million and $99.9 million, respectively, in reserves related to
workers compensation, general liability and self-insured health plans, of which $71.1 million and $69.8 million were classified as other noncurrent liabilities in the Consolidated Balance Sheets.

Reserve for Closed Stores

We continuously evaluate the performance of our retail stores and periodically close those that are
under-performing. Closed stores are generally replaced by a new store in a nearby location. We establish reserves for future occupancy payments on closed stores in the period the store closes. The costs for future occupancy payments are reported in
operating, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income. We calculate the cost for future occupancy payments, net of expected sublease income, associated with closed stores using the net
present value method at a credit-adjusted risk-free interest rate over the remaining life of the lease. Judgment is used to estimate the underlying real estate market related to the expected sublease income, and we can make no assurances that
additional charges will not be required based on the changing real estate environment.

Property and equipment
retirement losses at closed stores are recorded as operating, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income.

We establish deferred income tax assets and liabilities for temporary differences between the financial reporting bases
and the income tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. We record a valuation allowance on the deferred income tax assets to reduce the total to an
amount we believe is more likely than not to be realized. Valuation allowances at January 29, 2012, and January 30, 2011, were principally to offset certain deferred income tax assets for net operating loss carryforwards. We generally do
not materially adjust deferred income taxes at interim periods.

We recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax
position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different
than what is reflected in the historical income tax provisions and accruals.

We operate in multiple tax
jurisdictions and could be subject to audit in any of these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. To the extent we prevail in matters for which
reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given fiscal period could be materially affected. An unfavorable tax settlement would require use of our cash and could
result in an increase in our effective income tax rate in the period of resolution, while a favorable tax settlement could result in a reduction in our effective income tax rate in the period of resolution.

Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we
may be exposed to losses or gains that could be material.

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

January 29,2012

January 30,2011

Accrued income and sales tax

$

42,214

$

46,696

Non-trade accounts payable

53,797

19,854

Other(1)

105,236

89,515

$

201,247

$

156,065

(1)

There are no other individual items within other current liabilities greater than 5% of total current liabilities.

Revenue Recognition

We recognize revenue for store merchandise sales when the customer receives and pays for the merchandise at the register.
Services sales are recognized at the time the service is provided. E-commerce sales are recognized at the time that the customer receives the product. We defer revenue and the related product costs for shipments that are in-transit to the customer.
Customers typically receive goods within a few days of shipment. Such amounts were immaterial as of January 29, 2012, and January 30, 2011. Amounts related to shipping and handling that are billed to customers are reflected in merchandise
sales, and the related costs are reflected in cost of merchandise sales.

We record deferred revenue for the
sale of gift cards and recognize this revenue in net sales when cards are redeemed. Gift card breakage income is recognized over two years based upon historical redemption patterns and represents the balance of gift cards for which we believe the
likelihood of redemption by the customer is remote. During each of 2011 and 2010, we recognized $1.8 million of gift card breakage income. During 2009, we recognized $2.1 million of gift card breakage income. Gift card breakage is recorded monthly
and is included in the Consolidated Statements of Income and Comprehensive Income as a reduction of operating, general and administrative expenses.

We record allowances for estimated returns based on historical return patterns.

Revenue is recognized net of applicable sales tax in the Consolidated Statements of Income and Comprehensive Income. We record the sales tax liability in other current liabilities on the Consolidated
Balance Sheets.

In accordance with our master operating agreement with Banfield, we charge
Banfield license fees for the space used by the veterinary hospitals and for their portion of utilities costs. We also charge Banfield for its portion of specific operating expenses. Prior to February 1, 2010, license fees were treated as
a reduction of occupancy costs, which are included as a component of cost of merchandise sales, and reimbursements for specific operating expenses were treated as a reduction of operating, general and administrative expenses in the Consolidated
Statements of Income and Comprehensive Income. Beginning February 1, 2010, license fees and the reimbursements for specific operating expenses are included in other revenue.

Procurement costs, including merchandising and other costs directly associated with the procurement, storage and handling of inventory;



Store occupancy costs, including rent, common area maintenance, real estate taxes, utilities and depreciation of leasehold improvements and
capitalized lease assets; and



Reductions for vendor rebates, promotions and discounts.

Cost of Services Sales

Cost of services sales
includes payroll and benefit costs, as well as professional fees for the training of groomers, training instructors and PetsHotel associates.

Cost of Other Revenue

Cost of other revenue
includes the costs related to license fees, utilities and specific operating expenses charged to Banfield.

Vendor Concentration Risk

We purchase merchandise inventories from several hundred vendors worldwide. Sales of products from our two largest vendors
approximated 20.7%, 17.8% and 22.4% of our net sales for 2011, 2010 and 2009, respectively.

Advertising

We charge advertising costs to expense as incurred, which are classified within operating, general and administrative
expenses in the Consolidated Statements of Income and Comprehensive Income. Total advertising expenditures, net of vendor allowances for cooperative advertising incentives, and including direct response advertising, were $95.9 million,
$83.5 million and $67.1 million for 2011, 2010 and 2009, respectively. Vendor allowances for cooperative advertising incentives reduced total advertising expense by $33.0 million, $24.5 million and $19.5 million for 2011, 2010 and 2009,
respectively.

We recognize stock-based compensation expense based on the fair value of the awards at the grant date for all awards
except management equity units which are evaluated quarterly based upon the current market value of our common stock. We use option pricing methods that require the input of highly subjective assumptions, including the expected stock price
volatility. Compensation cost is recognized on a straight-line basis over the vesting period of the related stock-based compensation award.

Foreign Currency

The local currency is used as the functional currency in Canada. We translate assets and liabilities denominated in
foreign currency into United States dollars at the current rate of exchange at year-end, and translate revenues and expenses at the average exchange rate during the year. Foreign currency translation adjustments are included in other comprehensive
income and are reported separately in stockholders equity in the Consolidated Balance Sheets.

Basic earnings per common share is calculated by dividing net income by the weighted average of shares outstanding during
each period. Diluted earnings per common share reflects the potential dilution of securities that could share in earnings, such as potentially dilutive common shares that may be issuable under our stock incentive plans, and is calculated by dividing
net income by the weighted average shares, including dilutive securities, outstanding during the period.

Note 2  Recently Issued Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board, or FASB, issued new guidance
on testing goodwill for impairment. The guidance permits an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then
performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then the entity is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit. If the
carrying amount of the reporting unit exceeds its fair value, then the entity is required to perform the second step of the impairment test to measure the amount of the impairment loss, if any. The amendments in this update are effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We do not expect our adoption of the new guidance to impact our consolidated financial statements.

In June 2011, the FASB issued new guidance on the presentation of comprehensive income. The guidance requires that
all non-owner changes in stockholders equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. It eliminates the option to present components of other comprehensive
income as part of the statement of changes in stockholders equity. Additionally, the guidance requires that reclassification adjustments between other comprehensive income and net income be presented on the face of the financial statements,
except in the case of foreign currency translation adjustments that are not the result of complete or substantially complete liquidation of an investment in a foreign entity. However, in December 2011, the FASB issued an update that indefinitely
defers this requirement to present classification adjustments on the face of the financial statements. All other requirements in the June 2011 update remain unaffected by the December 2011 update and are to be applied retrospectively. Both updates
are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect our adoption of the new guidance to have a material impact on our consolidated financial statements.

In May 2011, the FASB issued new guidance to achieve common fair value measurement and disclosure requirements
between GAAP and International Financial Reporting Standards. This new guidance amends current fair value measurement and disclosure requirements to include increased transparency for valuation inputs and investment categorization. This new guidance
is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011. We do not expect our adoption of the new guidance to impact our consolidated financial statements.

From time to time, we have entered into foreign currency exchange forward contracts, or Foreign
Exchange Contracts, in Canada to manage the impact of foreign currency exchange rate fluctuations related to certain balance sheet accounts. We do not designate these Foreign Exchange Contracts as hedges and, accordingly, they are recorded at
fair value using quoted prices for similar assets or liabilities in active markets. The changes in the fair value are recognized in operating, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income.

At January 29, 2012, we had no Foreign Exchange Contracts outstanding. The fair value of the receivable
included in prepaid expenses and other current assets was immaterial at January 30, 2011.

We recorded the following (gains) losses on
Foreign Exchange Contracts (in thousands):

Year Ended

January 29,2012

January 30,2011

(Gain) loss

$

(77

)

$

412

We did not enter into Foreign Exchange Contracts during 2009.

Note 4  Income Taxes

Income before income tax expense and equity in income from Banfield was as follows (in thousands):

Year Ended

January 29,2012

January 30,2011

January 31,2010

United States and Puerto Rico

$

433,633

$

361,106

$

301,644

Foreign

12,644

8,785

7,687

$

446,277

$

369,891

$

309,331

Income tax expense consisted of the following (in thousands):

Year Ended

January 29,2012

January 30,2011

January 31,2010

Current provision:

Federal

$

147,728

$

133,753

$

111,911

State

22,934

17,968

19,215

170,662

151,721

131,126

Deferred:

Federal

574

(7,906

)

(4,439

)

State

(4,276

)

(3,419

)

(9,133

)

(3,702

)

(11,325

)

(13,572

)

Income tax expense

$

166,960

$

140,396

$

117,554

A reconciliation of the federal statutory income tax rate to our effective tax rate is as follows (dollars in
thousands):

The components of the net deferred income tax assets (liabilities) included
in the Consolidated Balance Sheets are as follows (in thousands):

January 29,2012

January 30,2011

Deferred income tax assets:

Capital lease obligations

$

189,650

$

192,825

Employee benefit expense

100,536

82,228

Deferred rents

36,225

37,596

Net operating loss carryforwards

16,586

17,717

Other

39,067

32,457

Total deferred income tax assets

382,064

362,823

Valuation allowance

(7,700

)

(7,700

)

Deferred income tax assets, net of valuation allowance

374,364

355,123

Deferred income tax liabilities:

Property and equipment

(198,192

)

(188,654

)

Inventory

(12,074

)

(6,113

)

Other

(19,232

)

(19,142

)

Total deferred income tax liabilities

(229,498

)

(213,909

)

Net deferred income tax assets

$

144,866

$

141,214

We are subject to United States of America federal income tax, as well as the income tax of multiple
state, territorial and foreign jurisdictions. We have substantially settled all federal income tax matters through 2007, state and local jurisdictions through 1999 and foreign jurisdictions through 2003. We could be subject to audits in these
jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. During 2011, 2010 and 2009, we recorded a net benefit of approximately $0.2 million, $0.2 million and
$1.0 million, respectively, from the settlement of uncertain tax positions with various state tax jurisdictions and the lapse of the statute of limitations for certain tax positions. The net benefits are reflected in income tax expense in the
Consolidated Statements of Income and Comprehensive Income. We cannot make an estimate of the range of possible changes that may result from other audits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Year Ended

January 29,2012

January 30,2011

January 31,2010

Unrecognized tax benefits, beginning balance

$

16,735

$

7,652

$

8,127

Gross increases  tax positions related to the current year

1,938

1,655

1,299

Gross increases  tax positions in prior periods

3,730

7,933

716

Gross decreases  tax positions in prior periods

(146

)

(24

)

(153

)

Gross settlements

(922

)

(405

)

(394

)

Lapse of statute of limitations

(393

)

(221

)

(2,215

)

Gross (decreases) increases  foreign currency translation

(2

)

145

272

Unrecognized tax benefits, ending balance

$

20,940

$

16,735

$

7,652

Included in the balance of unrecognized tax benefits at January 29, 2012, January 30,
2011, and January 31, 2010, are $11.1 million, $9.7 million, and $6.8 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

We continue to recognize penalties and interest accrued related to unrecognized tax benefits as income tax expense.
During 2011 2010 and 2009, the impact of accrued interest and penalties related to unrecognized tax benefits on the Consolidated Statements of Income and Comprehensive Income was immaterial. In total, as of January 29, 2012, we had recognized a
liability for penalties of $1.3 million and interest of $2.6 million. As of January 30, 2011, we had recognized a liability for penalties of $0.9 million and interest of $2.2 million.

Our unrecognized tax benefits largely include state exposures from filing positions taken on state tax returns and
characterization of income and timing of deductions on federal and state tax returns. We believe that it is reasonably possible that approximately $0.4 million of our currently remaining unrecognized tax positions, each of which are
individually insignificant, may be recognized by the end of 2012 as a result of settlements or a lapse of the statute of limitations.

As of January 29, 2012, we had, for income tax reporting purposes,
federal net operating loss carryforwards of $47.4 million which expire in varying amounts between 2019 and 2020. The federal net operating loss carryforwards are subject to certain limitations on their utilization pursuant to the Internal
Revenue Code. We also had a Canadian capital loss carryforward and state tax credit carryforwards of $14.3 million which can be carried forward indefinitely.

Note 5  Investments

Short-term Investments

At January 29, 2012, and January 30, 2011, our short-term investments consisted of municipal bonds with various
maturities, representing funds available for current operations. These short-term investments are classified as available-for-sale and are carried at fair value using quoted prices in active markets for identical assets or liabilities, which include
immaterial amounts of accrued interest at January 29, 2012, and January 30, 2011. The amortized cost basis at January 29, 2012, and January 30, 2011 was $20.1 million and $9.6 million, respectively. Unrealized holding gains and
losses are included in other comprehensive income in the consolidated statements of income and comprehensive income. We had no short-term investments during 2009.

Investments in Negotiable Certificates of Deposit

At January 29, 2012, we had investments in negotiable certificates of deposit with various maturities. These
investments are classified as held-to-maturity and are carried at their amortized cost basis. At January 29, 2012, the amortized cost basis of our investments in negotiable certificates of deposit were $13.1 million included in prepaid expenses
and other current assets and $2.1 million included in other noncurrent assets in the Consolidated Balance Sheets. The aggregate fair value of our investments in negotiable certificates of deposit was $15.2 million. We did not have investments in
negotiable certificates of deposit during 2010 or 2009. Unrecognized holding gains for 2011 were immaterial.

Equity
Investment in Banfield

We have an investment in Banfield which is accounted for using the
equity method of accounting. We record our equity in income from our investment in Banfield one month in arrears.

Our ownership interest in the stock of Banfield was as follows (in thousands):

January 29, 2012

January 30, 2011

Shares

Amount

Shares

Amount

Voting common stock and preferred stock

4,693

$

21,675

4,693

$

21,675

Equity in income from Banfield



32,109



21,183

Dividend received from Banfield



(15,960

)





Total equity investment in Banfield

4,693

$

37,824

4,693

$

42,858

Our investment consisted of voting common stock, comprising 21.4% of all voting stock as of
January 29, 2012, and January, 30, 2011. Our ownership percentage as of January 29, 2012, and January 30, 2011, considering all classes of stock (voting and non-voting), was 21.0%. Our investment includes goodwill of $15.9 million.
The goodwill is calculated as the excess of the purchase price for each step of the acquisition of our ownership interest in Banfield relative to that steps portion of Banfields net assets at the respective acquisition date.

Of the 4.7 million shares of voting stock of Banfield, we held:

(a)

2.9 million shares of voting preferred stock that may be converted into voting common stock at any time at our option; and

We recognized license fees and reimbursements for specific operating expenses from Banfield of
$36.7 million, $34.2 million and $33.2 million during 2011, 2010 and 2009, respectively. Receivables from Banfield totaled $3.1 million and $2.7 million at January 29, 2012, and January 30, 2011, respectively, and
were included in receivables, net in the Consolidated Balance Sheets.

The master operating agreement also
includes a provision for the sharing of profits on the sales of therapeutic pet foods sold in all stores with an operating Banfield hospital. The net sales and gross profit on the sale of therapeutic pet foods are not material to our consolidated
financial statements.

Note 6  Property and Equipment

Property and equipment consists of the following (in thousands):

January 29,2012

January 30,2011

Land

$

1,032

$

1,032

Buildings

14,193

15,520

Furniture, fixtures and equipment

1,004,584

984,755

Leasehold improvements

643,207

617,735

Computer software

108,834

110,398

Buildings under capital leases

753,705

720,959

2,525,555

2,450,399

Less: accumulated depreciation and amortization

1,516,144

1,347,380

1,009,411

1,103,019

Construction in progress

57,617

29,416

Property and equipment, net

$

1,067,028

$

1,132,435

Note 7  Reserve for Closed Stores

The components of the reserve for closed stores were as follows (in thousands):

January 29,2012

January 30,2011

Total remaining gross occupancy costs

$

29,974

$

34,313

Less:

Expected sublease income

(18,520

)

(22,964

)

Interest costs

(1,447

)

(1,585

)

Reserve for closed stores

$

10,007

$

9,764

Current portion, included in other current liabilities

2,756

3,056

Noncurrent portion, included in other noncurrent liabilities

7,251

6,708

Reserve for closed stores

$

10,007

$

9,764

The activity related to the reserve for closed stores was as follows (in thousands):

We record charges for new closures and adjustments related to changes in
subtenant assumptions and other occupancy payments in operating, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income. We can make no assurances that additional charges related to closed stores will
not be required based on the changing real estate environment.

Note 8  Earnings Per Common Share

The following table presents a reconciliation of the weighted average shares outstanding used to
calculate earnings per common share (in thousands):

Year Ended

January 29,2012

January 30,2011

January 31,2010

Basic

111,909

116,799

122,363

Dilutive stock-based compensation awards

2,084

2,606

2,338

Diluted

113,993

119,405

124,701

Certain stock-based compensation awards representing 1.3 million, 1.5 million and
3.0 million shares of common stock in 2011, 2010 and 2009, respectively, were not included in the calculation of diluted earnings per common share because the inclusion of the awards would have been antidilutive for the periods presented.

Note 9  Stockholders Equity

Share Purchase Programs

In June 2009, the Board of Directors approved a share purchase program authorizing the purchase of up to $350.0 million of
our common stock through January 29, 2012. During 2009, we purchased 5.9 million shares of our common stock for $140.0 million under the $350.0 million share purchase program. During the thirteen weeks ended May 2, 2010, we purchased
3.4 million shares of our common stock for $107.1 million under this $350.0 million program.

In June
2010, the Board of Directors approved a share purchase program authorizing the purchase of up to $400.0 million of our common stock through January 29, 2012, replacing the $350.0 million program. During 2010, we purchased 4.2 million
shares of our common stock for $156.2 million under the $400.0 million program. During the twenty-six weeks ended July 31, 2011, we purchased 3.9 million shares of our common stock for $165.4 million under this $400.0 million program.

In June 2011, the Board of Directors approved a share purchase program authorizing the purchase of up to
$450.0 million of our common stock through January 31, 2013, replacing the $400.0 million program, effective August 1, 2011. During the twenty-six weeks ended January 29, 2012, we purchased 3.7 million shares of our common stock
for $171.4 million under the $450.0 million program. As of January 29, 2012, $278.6 million remained available under the $450.0 million program.

Dividends

In 2011 and 2010, the Board of Directors declared the
following dividends:

At January 29, 2012, stock
option grants representing 4.8 million shares of common stock were outstanding under all of the stock option plans, and 25.5 million of additional stock options or awards may be issued under the 2011 Equity Incentive Plan. These grants are
made to employees, including officers and our Directors, at the fair market value on the date of the grant.

Activity in all
of our stock option plans is as follows (in thousands, except per share data):

We may grant restricted stock under the 2011 Equity Incentive Plan. Under the terms of the plan, employees may be awarded
shares of our common stock, subject to approval by the Board of Directors. The employee may be required to pay par value for the shares depending on their length of service. The shares of common stock awarded under the plan are subject to a
reacquisition right held by us. In the event that the award recipients employment by, or service to, us is terminated for any reason other than death or disability, we are entitled to simultaneously and automatically reacquire for no
consideration all of the unvested shares of restricted common stock previously awarded to the recipient.

The total fair value of restricted stock which vested during 2011, 2010 and 2009 was
$22.7 million, $17.2 million, and $11.0 million, respectively.

Performance Share Units

The 2009 Performance Share Unit Program, approved by the Board of Directors in January 2009, provides for
the issuance of Performance Share Units, or PSUs, under our equity incentive plans, to executive officers and certain other members of our management team based upon an established performance goal. For units granted in 2011, the
performance goal was defined as a specified growth of income before income tax expense and equity in income from Banfield as compared to 2010. The actual number of PSUs awarded to each participant was set at a minimum threshold of 50% of the
participants target number of PSUs, regardless of performance results, and could increase up to 150% based upon performance results. Actual performance against the 2011 performance goal was approved by the Board in March 2012, and qualified
participants received 150% of their target awards. For units granted in 2010, the performance goal was defined as a specified end-of-year income before income tax expense and equity in income from Banfield. The actual number of PSUs awarded to each
participant was set at a minimum threshold of 50% of the participants target number of PSUs, regardless of performance results, and could increase up to 150% based upon performance results. Our actual performance against the 2010 performance
goal was approved by the Board in March 2011, and qualified participants received 150% of their target awards. For units granted in 2009, the performance goal was defined as a specified end-of-year cash, cash equivalents and restricted cash balance.
The actual number of PSUs awarded to each participant was set at a minimum threshold of 50% of the participants target number of PSUs, regardless of performance results, and could increase up to 150% based upon performance results. Our actual
performance against the 2009 performance goal was approved by the Board in March 2010, and qualified participants received 150% of their target awards. The PSUs are subject to time-based vesting, cliff vesting on the third anniversary of the initial
grant date, and settle in shares at that time.

Activity for PSUs in 2011, 2010 and 2009 was as follows (in thousands):